E$4-20($Algo$)$ Calculating Target Cost $[$LO $4-8]$

Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates:

Estimated market price $ $1,600$

Annual demand $82,000$ units

Life cycle $4$ years

Target profit $27$ percentage return on sales

Required:

Compute the target cost of this product.

Compute the target cost if Majesty wants a $43$ percent return on sales.

Compute the target cost if Majesty wants a $7$ percent return on sales.