Sam’s Sports makes several lines of tennis racquets. Recently, Sam decided to carry an entire line of graphite racquets. He has done his competitive analysis and found that his competitors’ products sell for between $65 and $129 per racquet. He wants to manufacture a racquet that will sell for $100. Current materials estimates are $50, labor $28, and overhead $25 for a similar high-performance racquet in Sam’s line.

REQUIRED:

a. If Sam wants to make a 20% profit on the racquet, what is his target cost?

b. Given existing estimates, what is Sam’s current cost gap?