Company Cee is currently considering expansion into manufacturing two products, a printer and a digital camera. Company Cee normally uses a pricing policy of a 10% mark-up on standard prime cost on its products. However, as both the printing and camera markets are highly competitive, the finance director is considering using a target costing approach but wants to retain the same mark-up.

Printers

The maximum price the market will support is $200 per unit of the new printer. 60% of the direct cost of each printer is expected to be polymer.

Digital cameras

40% of the direct cost of each digital camera is expected to be software. The maximum price company Cee can source the software necessary to make one digital camera is currently $76, which has been built into the budget. On this basis, company Cee has determined that the cost gap between the budgeted cost per digital camera and the target cost per digital camera is $23.70.

Required:

(a)What is the target cost of the polymer used in the manufacture of printers?

(b)Assuming that target costing principles are adopted, what is the maximum selling price that company Cee can charge per digital camera?