a firm specializes in the production of door knobs, which are mostly sold within its territory. The selling price for each door knob is $15. Using the traditional allocation method to allocate manufacturing overhead, the full-product cost is determined to be $10. The company recently introduced the activity-based costing method to allocate its overhead. The refinement of costs shows that the full-product cost is $2.50 lower with activity-based costing than with traditional costing. Requirement: 1. Calculate the change in net profit percentage as a result of the introduction of activity-based costing. 2. The desired net profit margin of the company is 60%. If the production costs cannot be reduced, by how much should the selling price be increased in order to achieve the desired profit? (Use the cost estimates under activity-based costing.) 3) Ferrero Corp. manufactures gourmet dips along with potato chips flavored with Cajun spices. The market price for similar chips is $7. The management of the company desires a 30% net profit margin. The current costing data relating to this product are as follows. Direct materials $1.00 Direct labor 1.50 Manufacturing overhead 2.75 Nonmanufacturing costs 0.75 Requirement: Determine if Ferrero's current full-product costs meet its target cost.