Linz Riding Apparel has identified a new market for half chaps for English-style riding. The half chaps will be marketed to those riders with non-standard leg-calf dimensions (e.g., very short, very tall, muscular). The only market competition is from custom-made providers who regularly charge $350 per pair of half chaps. Linz would like to offer its half chaps to be competitive with the high quality off-the-shelf half chaps which sell for $125 (on average).

Required:

A. If Linz desires a 15% return on sales, what is the target cost?

B. The original cost estimate to design, produce, and sell the half chaps is $121.50. What are Linz Riding Apparel’s options?

C. If Linz’ management believes that this is a good business opportunity and the timing is right, what approach would you recommend to help them achieve their goals? Discuss how to implement your suggestion.