Walker Ltd is a New Zealand manufacturer of sports shoes for men and women. It has sustained strong growth in the New Zealand market in recent years due to the comfortability and quality of its shoes. Walker Ltd. is considering extending its business in the Australian market, where identical shoes sell for an average of $85 wholesale price. Management has appointed a marketing consultant to obtain information about what features Australian consumers seek most in shoes. The marketing consultant conducted a market-research and provided Walker Ltd following information on the features and approximate cost of adding these features for the Australian market:

Features Desired in Australian market	Cost to Add (in $)	Customer Choice Rating (5 is most important)
Colourfast material	$14.50	1
Lighter weight	16.75	3
Extra-soft inside	13.00	2
Longer-wearing sole	15.50	4

Walker Ltd. is considering adding any of the features in entering the Australian market. The current average manufacturing cost of Walker's shoes is $50. Walker currently is making an average 20% profit margin per pair sold. Walker would like to maintain the same profit percentage in the Australian market. However, the firm recognises that the Australian market requires an additional manufacturing cost of $5 per pair of shoes. Ignore the currency exchange rate.

Question 2.1

1. What is the target manufacturing cost for shoes to be sold in the Australian market without adding the new features? (b) Should Walker Ltd. Manufacture for the Australian market? Use target cost to make your decision [4 marks]

   Question 2.2

   Should there be any cost reduction target if Walker Ltd. is not considering any new feature for entering the Australian market? Justify your answer. [3 marks]

   Question 2.3

   Calculate the cost reduction target separately for each feature, assuming that Walker Ltd. requires adding at least one feature to enter the Australian market. [8 marks]