Target Costing Basic Motor Corporation uses target costing. Assume that Basic ma

Question

Target Costing Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,100. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,700 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year?

Explanation / Answer

a.

Selling price = Total cost + 25% markup on total cost

= 19,700 + (19,700*25%)

= 19,700 + 4,925

= 24,625

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