14. Madison produces bicycles in a highly competitive market. During the past year, the company has added a 20% markup on the $270 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $320 selling price, and is seriously eroding Madison's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 10% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Madison will charge and (2) company's target cost?

	Selling Price	Target Cost
A.	$320	$288
B.	$320	$270
C.	$324	$288
D.	$324	$270
E.	Some other combination of selling price and target cost.

	Selling Price	Target Cost
A.	$320	$288
B.	$320	$270
C.	$324	$288
D.	$324	$270
E.	Some other combination of selling price and target cost.

Choice A

Choice B

Choice C

Choice D

Choice E

15. The following costs relate to Southside Company: Variable manufacturing cost, $42; variable selling and administrative cost, $20; applied fixed manufacturing overhead, $27; and allocated fixed selling and administrative cost, $16. If Southside uses absorption manufacturing-cost pricing formulas, the company's markup percentage would be computed on the basis of:

$42.

$62.

$69.

$105.

None of these