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PROBLEM 8-5. Target Costing Baker Plumbing Fixtures is developing a pre-plumbed, acrylic shower unit. The team developing the product includes representatives from mar- keting, engineering, and cost accounting. To date, the team has developed a set of features 293 PROBLEMS that it plans on incorporating in the unit including a seat, two shower heads, 4 body sprays, and a steam unit. With this set of features, the team believes that a price of $3,500 will be attractive in the marketplace. Baker seeks to earn a per unit profit of 25 percent. Required a. Calculate the target cost per unit. b. The team has estimated that the fixed production costs associated with the product will be $1,500,000 and variable costs to produce and sell the item will be $2,000 per unit. In light of this, how many units must be produced and sold to meet the target cost per unit? c. Suppose the company decides that only 1,800 units can be sold at a price of $3,500 and, therefore, the target cost cannot be reached. The company is considering drop- ping the steam feature, which adds $600 of variable cost per unit. With this feature dropped, the company believes it can sell 2,500 units at $3,000 per unit. Will Baker be able to produce the item at the new target cost or less? PROBLEM S_6 A