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Mucky Duck makes swimsuits and sells these suits directly to retailers. Although Mucky Duck has a variety of suits, it does not make the All-Body
Mucky Duck makes swimsuits and sells these suits directly to retailers. Although Mucky Duck 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 $110. Given it experience, Mucky Duck believes the All-Body suit would have the following manufacturing cost. Direct matierials----$25 Direct Labor---$30 Manufacturing Overhead-----$45 Total costs---$100 a. Assume that Mucky Duck uses cost-plus pricing, setting the selling price 24% above it cost. (1)What would be the price charged for the All-Body swimsuit? (2)Under what circumstances might Mucky Duck consider manufacturing the All-Body swimsuit given this approach? b. Assume that Mucky Duck uses target costing. What is the price that Mucky Duck would charge the retailer for the All-Body swimsuit? c. What is the highest acceptable manufacturing cost Mucky Duck would be willing to incur to produce the All-Body swimsuit, if it desired a profit of 25 per unit?
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