E15.22 Target costing for a manufacturer LO3 OzSunnies Limited manufactures plastic lenses for sunglasses at Ballarat in Victoria. One of its top selling lines is the flexi-lens, which has a flexible lens surface to minimise breaking or cracking. Earlier this year, an overseas company entered the market offering a similar lens at a price 15% below flexi-lens' current market selling price of $16.00 per pair of lenses (called a unit pair). Head office have decentralised decision making, classifying OzSunnies Limited as a profit centre. The target profit is set at $4.00 per unit pair. This represents a profit margin of 25% (on current market selling price) on each of its products. Required: 1 What target cost would OzSunnies Limited need to set for the flexi-lens to remain competitive and meet the current dollar profit requirements of OzSunnies Limited's Head Office ? 2 Calculate the $4.00 profit margin as a percentage of the new selling price. 3 Based on the literature, when are the majority of costs committed (or 'locked in') for the flexi-lens, compared to when they are incurred? 4 Using this information, explain how OzSunnies Limited could apply the principles of life cycle management to achieve this target cost