1. Target Costing

   Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,600. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,600 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% An amount that is added to a cost amount to determine product price.markup on total cost).

   a. What price will Basic establish for the QuikCar for the upcoming model year? $

   b. Since the estimated manufacturing cost

   • exceeds
   • is less than
   the target cost, Basic
   • may increase
   • must reduce
   its total costs to maintain competitive pricing within its profit objectives.