(Target costing) The marketing department at Cellton Production Company has an idea for a new product that is expected to have a life cycle of six years. After conducting market research, the company has determined that the product could sell for $350 per unit in the first four years of life and for $275 per unit for the last two years. Unit sales are expected as follows:

Per-unit variable selling costs are estimated at $80 throughout the product’s life; total fixed selling and administrative costs over the six years are ex¬ pected to be $1,750,000. Cellton Production Company desires a profit margin of 20 percent of selling price per unit.

a. Compute the life-cycle target cost to manufacture the product. (Round to the nearest cent.)

b. If the company expects the product to cost $225 to manufacture in the first year, what is the maximum that manufacturing cost can be in the following five years? (Round to the nearest cent.)

c. Assume that Cellton Production Company engineers indicate that the ex¬ pected manufacturing cost per unit is $210. What actions might the com¬ pany take to reduce this cost?

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Year 1 4,000 Year 2 3,600 Year 3 4,700 Year 4 5,000 Year 5 1,500 Year 6 1,000