QUESTION 4 Medina Sdn. Bhd. is introducing a new product whose direct materials cost is RM37 per unit, direct labor cost is RM19 per unit, variable manufacturing overhead is RM6 per unit, and variable selling and administrative expense is RM4 per unit. The annual fixed manufacturing overhead associated with the product is RM91,000 and ts annual fixed selling and administrative expense is RM42,000. Management plans to produce and sell 7,000 units of the new product annually. The new product would require an investment of RM595,000 and has a required return on investment of 20%. For many years, management has been setting the selling price on a new product using the absorption costing approach to cost-plus pricing. Required i. Determine the unit product cost for the new product (3 marks) ii. Determine the markup percentage on absorption cost for the new product (3 marks) ii Determine the target selling price for the new product using the absorption costing approach. 3 marks) The going market price for an identical product of comparable quality is RM85. For Medina to be competitive, they must offer the product based on the market price. If Medina used target costing for the new product, by how much must costs change if the company desires to be competitive and maintain the same percentage of gross iv. margin as obtained under absorption costing? (6 marks) Contrast cost plus pricing and target costing. Why is a focus on the customer such a v. key principle of target costing? 4 marks) vi. List and explain FOUR major factors which affect pricing decisions. (6 marks)