Kit co ltd has recently developed a personal music player and is now considering what price to charge for the new product. A market research company has produced the following forecasts of demand at three potential selling prices:

Selling prices$250$350$450

Sales units/annum10,0008,0006,000

Fixed costs/annum$800,000$500,000$200,000

Variable costs are forecast at $220 per unit at any activity level.

REQUIRED

1. Calculate for each potential selling price, the budgeted profit, The Breakeven point in units and the margin of safety
2. Using a graph paper, draw and label a Breakeven chart for a selling price of $350 for activity levels between 0 and 8,000 units
3. Define target costing and explain briefly how it could be used by Kit Co Ltd in the design, manufacture and sale of the personal music players