Whitenall Corporation produces and sells teeth whitening products. The company has created and patented a formula for a new whitener. The CEO wants to make sure the product is priced competitively. The company anticipates that it will sell 400,000 units of the product in the first year with the following estimated costs:

Product design and licensing	$1,700,000
Direct materials	4,000,000
Direct manufacturing labor	1,600,000
Variable manufacturing overhead	400,000
Fixed manufacturing overhead	2,500,000
Fixed marketing	3,000,000

Required:

1. The company believes that it can successfully sell the product for $45 a bottle. The companys target operating income is 30% of revenue. Calculate the target full cost of producing the 400,000 units. Does the cost estimate meet the companys requirements?

Group of answer choices

$33 per bottle, No doesn't meet target

$28.75 Yes does meet target

$35 per bottle, Yes does meet target

$15 per bottle, Yes does meet target

2. A component of the direct materials cost requires a very expensive bleaching agent. If the company could eliminate this one ingredient, the materials cost would decrease by 25%. However, this would require design changes of $300,000 to engineer a chemical equivalent of the ingredient. Will this design change allow the product to meet its target cost?

Group of answer choices

$30.50, Yes does meet target

$31.25 per bottle, No does not meet target

$33 per bottle. No does not meet target

$31.25 per bottle, Yes does meet target

3. The CEO does not believe that the formula should be altered for fear it will tarnish the companys brand. She prefers that the company become more efficient in manufacturing the product. If fixed manufacturing costs can be reduced by $250,000 and variable direct manufacturing labor costs are reduced by $1 per unit, will Whitenall achieve its target cost?

Group of answer choices

$32.38 per bottle, Yes does meet target

$31.38 per bottle, Yes meets target

$33 per bottle, No does not meet target

$32.38 per bottle, No does not meet target