Life cycle management and target costing: manufacturer

Solarcare Ltd manufactures plastic lenses for sunglasses at Quenbeyan, in NSW. One of its top-selling lines is the XRP Lens, which has a scratch-resistant polarised surface. Earlier this year, a Taiwanese company entered the market offering a similar lens at a price 20% below the XRP price of $4 per unit. Solarcare's parent company has a target profit margin of 40% (on sales) on each of its products.

1. What target cost would have to be set for the XRP to remain competitive and meet the requirements of Solarccare's parent company?