Toyota Motor Corporation uses target costing. Assume that Toyota marketing personnel estimate that the competitive, average selling price for the Rav4 in the upcoming model year will need to be $24,000. Assume further that the Rav4's total unit cost for the upcoming model year is estimated to be $20,500 and that Toyota requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost).

What price will Toyota establish for the Rav4 for the upcoming model year? The answer is NOT $25,625.