2. Premo Pens, Inc., is in the process of developing a new pen to replace its existing top-of-the-line Executive Model. Market research has identified the critical features the pen must have, and it is estimated that customers would be will- ing to pay S30 for a pen with these features. Premo's produc- tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu- tive Model sells for $24 and has a total production cost of S20. A competitor sells a pen similar to the proposed model, but without Premo's patented easy retract feature, for $28. It is estimated to cost the competitor $25 to produce. If Premo seeks to earn a 20 percent return on sales on the new model, which of the following represents the target cost for the new pen a. $26.00 b. $22.40. c. $24.00 d. $19.80