Target Costing and Pricing

question 184

Essay

Target costing and pricing.Mega Products makes valves for a variety of oil extraction equipment.Mega Products sells the valves to companies that manufacture and sell pumps.The company's market research department has discovered a market for valves that is similar in automated manufacturing equipment in another industry.The market research department indicates that they could sell to these new outlets for $250.Assume Mega Products desires an operating profit of 20 percent of sales.
Required:
What is the highest acceptable manufacturing cost for which Mega Products would produce the valves?

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Definitions:

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