Exercise 21-03 a1, b-c (Video)

Coronado Company makes swimsuits and sells these suits directly to retailers. Although Coronado has a variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $100. Given its experience, Coronado believes the All-Body suit would have the following manufacturing costs.

	Direct materials		$25
	Direct labor		32
	Manufacturing overhead		43
	Total costs		$100

Assume that Coronado uses cost-plus pricing, setting the selling price 20% above its costs. What would be the price charged for the All-Body swimsuit?

Selling price

$

Assume that Coronado uses target costing. What is the price that Coronado would charge the retailer for the All-Body swimsuit?

Selling price

$

What is the highest acceptable manufacturing cost Coronado would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $25 per unit? (Assume target costing.)

Target cost

$