My Limited has decided to adopt the target-costing approach for all new products. The following data for a new product has been made available by the companys design department:

• Forecast annual sales volume (in units) 100 000
• Target selling price per unit - $300.00
• Desired profit margin per unit as a percentage of selling price 20%
• Expected standard cost per unit prior to value engineering initiatives $260.00

For My Limited to achieve the desired profit margin per unit, what reduction in per unit cost will the design department need to achieve through the value engineering process?

a.

$40

b.

$60

c.

$54

d.

$20