Sonora,Inc

question 71

Multiple Choice

Sonora,Inc.is launching a new product that it estimates will sell for $25 per unit.Annual demand is estimated to be 70,000 units.Sonora estimates that using its current manufacturing technology,it can manufacture the units for $23 per unit,but if it purchases a new machine,the units can be manufactured for $22 per unit.Sonora has a target profit of 20% return on sales.Under target costing,what is the target cost for the new product?

• A)$20
• B)$22
• C)$23
• D)$25

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Definitions:

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