Suppose you have just started a business to manufacture your newest invention, the photon gismo. Let's say you believe that after a few years on the market, photon gismos will sell for about \($130\). This allows for the introduction of similar devices by your competitors. Furthermore, let's say you want to make a profit of \($35\) on each gismo sold.

Required:

1. What is the target cost for the photon gismo?
2. What is the target profit?
3. What is the target price?
4. Suppose your engineers and cost accountants conclude that your design of the photon gismo will result in a unit cost of \($115\) . How can you use the concept of target costing to help achieve your objective?
5. How could value engineering help in this process? Suggest an example.
6. How could two-dimensional activity-based costing help? Suggest an example.