Question 3: Managing costs: Target costing and Quality cost (25 marks) Elipsis Electronics Lid assembles and sells speakers for high-fidelity sound systems. Because of the rapid growth of technological innovation in the hi-fi market, the company is considering ending its product range to include a new Easy-Ear speaker system (EESS). A selling price of 580 has been estimated to compete with a similar speaker on the market that has comparable features to Elipsis Electronic'sintended product. A gross profit margin of at least 30% on the selling price would be required to cover administration and marketing overheads and to make an acceptable level of profit. A cost estimation study has produced the following estimate of production cost for the new EESS Costiter Particulars Direct material Circuit board) $9 perunt Direct material (Wiring) Each unit of the EESS will require 0.5 meters of wiring, but there will be necessary waste of 10% of the wires used. This waste is the result of cutting the wires to match with the required length Wire costs $1,80 per meter Direct labor Each unit of the EESS will require 0.50 hours of direct labour time. However, it is expected that there will be unavoidable ide time equal to 5% of the total labour time paid for. Labour is paid $19 per hour Production overheads It is expected that production overheads will be absorbed into product costs at the rate of $60 per direct labour hour, for each active hour worked (Overheads are not absorbed into the cost of idle time). Required Question 3.1 Calculate the target cost per unt for the EESS and identity any cost gap that might exist compared to the Elipsis's estimated costs 7 marks Yosur Answer Target costs Estimated costs Cost gap Show your workings here (expand the space as required): Word count Question 3.2 Deass possible steps Elipsis Electronics Lid could take to reduce this gap. Word limit: 250 words. Note the word court at the end of your answer Your Answer expand the space as required: marks) Word count