QUESTION TWO $(10$ MRKS$)$

KALICHI co ltd has recently developed a personal music player and is now considering what price to charge for the new product. A market research company has produced the following forecasts of demand at three potential selling prices:

Selling pricesK$250$K$350$K$450$

Sales units$/$annum$10,0008,0006,000$

Fixed costs$/$annumK$800,000$K$500,000$K$200,000$

Variable costs are forecast at K$220$ per unit at any activity level.

REQUIRED

i$.$Calculate for each potential selling price, the budgeted profit, The Breakeven point in units and the margin of safety

ii$.$ Define target costing and explain briefly how it could be used by KALICHI Co Ltd in the design, manufacture and sale of the per sonal music players