Applying Target Costing to the Service Sector: Sunline Auto Insurance Case.This case has been developed to improve your understanding of strategic cost management using a specialist technique known as TC. Traditionally an approach such as cost-plus pricing is used when the core assumption is that customers accept any price determined by the firm. However, if customers show an inclination to resist the price set by the firm, the firm could resort to cost cutting and lowering prices. This case utilizes a strategic approach by starting with the price the customer is willing to pay for the product or service features and then arriving at a product cost that is allowable. Once you have read the case, address the following case questions. 1. Describe the general competitive environment of the auto insurance industry. 2. Describe and explain cost-plus pricing in a service firm context, specifying cost categories and their influence on pricing. 3. Explain the key steps involved in TC. Use Table 4 as the basis for your discussion. 4. Assess the specific challenges of introducing TC in a service firm as opposed to a manufacturing firm. How should TC be adapted in a service firm? 5. How would you improve the profitability of Sunline? Evaluate the specific steps you would consider. Focus on the costs currently incurred and how they could be reprioritized and cut to meet the target cost, in line with the current competitive positioning. Use the information in Tables 24 to illustrate and justify your answer. 6. Evaluate and explain the key challenges (cultural, management systems, information needs, etc.) involved in implementing a TC approach at Sunline.