1. Slovenia Corporation manufactures a product that is marketed in North America and Asia. Its total manufacturing cost to produce 100 units of product X is 2,250 detailed as follows: Raw materials 500

Direct labor 1,000

Overhead 750

Total 2,250

The company bases its selling price on a cost-plus formula.

Required:

A) What would be Slovenia Corporations selling price per unit if it wants a gross profit of 12 percent above cost? (1 mark)

B) Slovenia Corporation wants to be price competitive on an international basis. To accomplish this, it must be able to price its product no higher than $20.50. Using the target costing methodology, what would be Slovenia Corporation's allowable costs? Assume that the company still wants a profit margin of 12% percent of its allowable costs. What does your calculation imply about its manufacturing costs?