Target costing

The marketing department at Cleveland Furniture Mfg$.$ has an idea for a new product that is expected to have a six$-$year life cycle. After conducting market research, the company found that the product could sell for $$800$ per unit in the first four years of life and for $$650$ per unit for the last two years. Unit sales are expected to be as follows:

Year $13,480$ Year $23,132$ Year $34,089$ Year $44,350$ Year $51,305$ Year $6870$

Per$-$unit variable selling costs are estimated at $$140$ throughout the product$$s life; total fixed selling and administrative costs over the six years are expected to be $$3,700,000.$ Cleveland Furniture Mfg$.$ desires a profit margin of $15$ percent of selling price per unit.

a$.$ Compute the life cycle target cost to manufacture the product. $($Round to the nearest cent.$)$

Note: Round your answer to two decimal places $($i$.$e$.,$ round $$2\mathrm{.}4555$ to $$2\mathrm{.}46).$

$Answer

per unit

b$.$ If the company expects the product to cost $$430$ to manufacture in the first year, what is the upper bound for manufacturing cost in the following five years?

Note: Round your answer to two decimal places $($i$.$e$.,$ round $$2\mathrm{.}4555$ to $$2\mathrm{.}46).$

$Answer

per unit