Assume Apple is designing a new smartphone. Each unit of this new phone is expected to require $230 of direct materials, $10 of direct labor, $20 of variable overhead, and $20 of variable selling and administrative costs.

Required

1. If Apple uses the variable cost method to set selling prices and plans a markup of 200% of variable costs, what is the expected selling price per unit of this new phone?

2. Assume that Apple is a “price taker” and the market sales price for this type of phone is $800 per unit. Compute Apple’s target cost if the company desires a profit of 60% of sales price.