Mote Enterprises produces a product with fixed costs of $36,000 and variable cost of $2.50 per unit.

Question:

Mote Enterprises produces a product with fixed costs of $36,000 and variable cost of $2.50 per unit. The company desires to earn a $20,000 profit and believes it can sell 10,000 units of the product.
Required
a. Based on this information, determine the target sales price.
b. Assume a competitor is currently selling a similar product for $6.80 per unit. Explain how Mote can use target costing to maintain its desired profitability.