Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell
Question:
Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its catalog, which it issues monthly. Given market research, Mesa believes that it can charge $20 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $22. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce Slim Slicer's cost substantially. Mesa wishes to earn a return of 40% of the selling price.
Requirements:
(1). Calculate the target cost for the Slim Slicer.
(2). When is target costing particularly helpful in deciding whether to produce a given product?
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1119036432
7th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso