Al Hind Corporation manufactures a product that is marketed in North America and Asia. Its total manufacturing cost to produce 1,000 units of product X is 23,000 detailed as follows: Raw materials 5,000

Direct labour 10,000

Overhead 8,000

Total 23,000 The Company bases its selling price on a cost-plus formula.

Required: a) What would be Al Hind Corporations selling price per unit if it wants a gross profit of 50 percent above cost? (1.5 Mark)

b) Al Hind Corporation wants to be price competitive on an international basis. To accomplish this, it must be able to price its product no higher than $27.50. Using the target costing methodology, what would be Al Hind Corporation's allowable costs? Assume that the company still wants a profit margin of 25% percent of its allowable costs (2 marks). What does your calculation imply about its manufacturing costs? (0.5 Marks)