QUESTION SIX A company is developing a new product using a target costing approach. The initial assumption was that a sales volume of 200,000 units could be achieved at a selling price of K25 per unit. However, market research indicate that to achieve the sales volume of 200,000 units the selling price should be K23.5.The company wishes to obtain an average profit margin of 20%. The following data have been estimated for the product; Direct Material K10.45 per unit, Hourly production volume 20 units, Direct Labour cost K64 per hour, Variable overheads K82 per hour (absorbed on direct labour hour basis).Fixed costs to produce 200,000 units are estimated to be K680,000. What reduction in the cost per unit is required in order to achieve the target cost per unit? (2 Marks) QUESTION SIX A company is developing a new product using a target costing approach. The initial assumption was that a sales volume of 200,000 units could be achieved at a selling price of K25 per unit. However, market research indicate that to achieve the sales volume of 200,000 units the selling price should be K23.5.The company wishes to obtain an average profit margin of 20%. The following data have been estimated for the product; Direct Material K10.45 per unit, Hourly production volume 20 units, Direct Labour cost K64 per hour, Variable overheads K82 per hour (absorbed on direct labour hour basis).Fixed costs to produce 200,000 units are estimated to be K680,000. What reduction in the cost per unit is required in order to achieve the target cost per unit? (2 Marks)