P25-4B Even though Problem 25-3B shows that MyPage's ABC costs are lower than under the simpler original cost system. Innovations' CEO Tony Millano is still concerned that the software's profitability may be less than expected. Millano asks Zeller to recommend a sale price that will yield a profit of $12 per unit, after direct production costs of $3 per unit, mar- keting and distribution costs of $5 per unit, and the indirect production costs of $22.50 per unit (from Problem 25-3B). Millano believes that the sale price must be $39 or less to reach estimated sales of 30,000 units. If Zeller's "cost-plus-based" recommended sale price exceeds $39, Millano authorizes him to establish a cross-functional value engineering team to squeeze out cost savings. Required 1. Determine the sale price that yields a profit of $12 per unit. Will this meet Millano's tar- get price? 2. Zeller establishes a value engineering team that finds new software writing routines can cut application development costs for the six new applications from $3 million to $2.7 million. This would also save $600,000 in content production and require 14 million instead of 15 million lines of code. Testing would be unaffected. The value engineering team also finds that improved supply-chain management can cut MyPage's direct pro- duction costs from $3 per unit to $2 per unit. However, marketing and distribution costs for MyPage are unchanged. Given these cost savings, what are the indirect activity cost allocation rates for application development, content production, and testing? 3. If the value engineering team's suggestions are implemented, MyPage would require 480.000 lines of code and the same 100 hours of testing. What is the new indirect activ- ity (production) cost per unit (including all three activities) for MyPage? 4. With these changes, can Innovations set a sale price of $39 and still earn a profit of $12 per unit?