13.45 Target costing (LO3). Orange, Inc., sells portable music players and other electronic products. The firm is contemplating introducing the fifth generation of its award- winning player. The firm's engineers have reduced the size of the product by a third, even as they have increased memory capacity and video resolution. The current dispute centers on a particular custom-designed component. This component was designed at a cost of $750,000. Developing a newer component would cost an addi- tional $100,000 plus $8 per unit. All of the required functionality, however, could be delivered by slightly modifying the existing component, used in the current fourth- generation player. Development costs for modifying the old component are likely to be around $18,000 plus $5 per unit. However, the older component would reduce battery life by 5% relative to the newer component Currently, Orange projects selling between 1 and 2 million units of the product over its life cycle. The exact sales volume depends greatly on whether the product gener ea "must have accessory for fashionable teens and young adults. The product's average selling price is $249 per unit. Moreover, Orange usually has a 50% contribution margin ratio and a 20% profit margin on similar products. Required: a. How much more will using the newer component cost if Orange sells 1 million units? 2 million units? b. What is your recommendation? 13.45 Target costing (LO3). Orange, Inc., sells portable music players and other electronic products. The firm is contemplating introducing the fifth generation of its award- winning player. The firm's engineers have reduced the size of the product by a third, even as they have increased memory capacity and video resolution. The current dispute centers on a particular custom-designed component. This component was designed at a cost of $750,000. Developing a newer component would cost an addi- tional $100,000 plus $8 per unit. All of the required functionality, however, could be delivered by slightly modifying the existing component, used in the current fourth- generation player. Development costs for modifying the old component are likely to be around $18,000 plus $5 per unit. However, the older component would reduce battery life by 5% relative to the newer component Currently, Orange projects selling between 1 and 2 million units of the product over its life cycle. The exact sales volume depends greatly on whether the product gener ea "must have accessory for fashionable teens and young adults. The product's average selling price is $249 per unit. Moreover, Orange usually has a 50% contribution margin ratio and a 20% profit margin on similar products. Required: a. How much more will using the newer component cost if Orange sells 1 million units? 2 million units? b. What is your recommendation