1. Managing cost: Life-cycle costing and Target costing

A company manufacturing hearing aid devices. One of its top selling device "elite" has a price of $4,500. The device has a cost of $2,925 .Recently a competitor entered the market and started offering a similar device at a price of $3,600 per device.

Management is anxious that it must reduce the price to $3,600 to compete in the highly cost -conscious hearing aid device market. Marketing department believes that the new price will maintain the current sales level. Th company currently sells 10,000 devices per

Required : a) what is the target cost if the selling price is reduced to $3,600 and the company wants to maintain the same profit margin percent?

b) what is the target cost if the selling price is reduced to$3,600 and the company wants to maintain its same income level?

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