Toyota Motor Corporation (TM) uses target costing. Assume that Toyota marketing personnel estimate that the competitive selling price for the Camry in the upcoming model year will need to be $27,000. Assume further that the Camry's total unit cost for the upcoming model year is estimated to be $22,500 and that Toyota requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost}. a. What price will Toyota establish for the Camry for the upcoming model year? Q h. Since the estimated manufacturing cost ' the target cost, Toyota ' its total costs to maintain competitive pricing within its prot objectives. WoolCorp WoolCorp buys sheep's wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You've just been hired as a production manager at WoolCorp. Currently WoolCorp makes three products: (1) raw, clean wool to be used as stufng orinsulation; (2) wool yarn for use in the textile industry, and (3) extra-thick yarn for use in rugs. Upper management would like your recommendations regarding a production decision regarding their current and proposed product lines. Continue/Discontinue For the past year, WoolCorp has experimented with its third product, extraethick rug yarn. The company wishes to consider whether to continue or discontinue manufacturing and selling this product. You decide to prepare a differential analysis of the income related to all three products. To begin your analysis, you review the following condensed income statement. Then scroll down to complete the differential analysis. WoolCorp Condensed Income Statement For the Year Ended December 31, 20'!!! Raw Wool Wool Yarn Rug Yarn Total Company Sales $200,000 $155,000 $177,000 $532,000 Costs of goods sold: Variable costs $(4B,000} $(18,600) $(37,170) $(103,770) Fixed costs (32,000) (12,400) (24,780) (69,180) Total cost of goods sold $030,000} $51,000) $(61,950) $(172,950) Gross profit $120,000 $124,000 $115,050 $359,050 ? Operating expenses: Variable expenses $(5,000) $(7,750) $(53,080) $(65,830) Fixed expenses (89,000) (77,000) (106,200) (272,200) Total operating expenses $(94,000) $(84,750) $(159,280) $(338,030) Operating income (loss) $26,000 $39,250 $(44,230) $21,020 Complete the following table using the data in the preceding income statement to compare the effects of dropping the rug yarn line of products. If required, use a minus sign to indicate a loss. Differential Analysis Continue Rug Yarn (Alternative 1) or Discontinue Rug Yarn (Alternative 2) December 31, 20Y8 Continue Rug Yarn (Alternative 1) Discontinue Rug Yarn (Alternative 2) Differential Effects (Alternative 2) Revenues $ $ Costs: Variable Fixed Profit (loss) $ Final Questions Answer the following question (1), then fill in table (2). 1. After reviewing vour work on the Continue/Discontinue panel should WoolCorn continue (Alternative 1 ) or discontinue (Alternative ?) the run varn product line?1. After reviewing your work on the Continue/Discontinue panel, should WoolCorp continue (Alternative 1) or discontinue (Alternative 2) the rug yarn product line? v 2. The following table shows several business decisions that might need to be made across the top row. Along the leftehand column, there are important Factors to consider. Select the factar{s) that are important to the decision. Select all that apply. If the factor is not important to any of the decisions, select "yes" on the "Nat Important" dropdown, otherwise select "no". Lease or Sell or Special Price Continue or Production Not Sell Process Further Order Make or Buy Discontinue Bottleneck Important Impact on regular v v v v v v 7 prices Contribution margin per