Please See Attached.

Example:Lowest Cost Corporation uses target costing to aid in the final decision to release new products toproduction.A new product is being evaluated.Market research has surveyed the potentialmarket for this product and believes that its unique features will generate a total demand over theproducts life of 70,000 units at an average price of $360. The target costing team has membersfrom market research, design, accounting, and production engineering departments.The team has worked closely with key customers and suppliers. (See attachment for cost structure).

Management has a target contribution to profit percentage of 40% of sales.This contributionprovides sufficient funds to cover corporate support costs, taxes, and a reasonable profit.

1.Should the new product be released to production?Explain.

2.Approximately 70% of manufacturing costs for this product consists of materials andparts that are purchased from suppliers.Key suppliers on the target-costing team havesuggested process improvements that will reduce supplier cost by 20%.Should the newproduct be released to production?Explain.

3.New process technology can be purchased at a cost of $220,000 that will reduce non-outsourced manufacturing costs by 25%.Assuming the suppliers process improvementsand new process technology are implemented, should the new product be released toproduction?Explain.