Chapter 15 Target Costing and Cost Analysis for Pricing Decisions Predicted Costs of 10,000 Starter Sets Direct material per set ................. Direct labor per set, 2 hours at $10.00 per hr ......... Variable selling cost per set..... Total - Variable-overhead rate .............. Fixed-overhead rate ........ .. $ 8.00 per direct-labor hour $12.00 per direct-labor hour In addition, the controller indicated that the Accounting Department would allocate $20,000 of fixed administrative expenses to the Starter Set product line. Required: 1. Compute the cost of a Starter Set using each of the four cost definitions commonly used in cost- plus pricing formulas. 2. Determine the markup percentage required for the Starter Set product line to earn a target operating income of $317,500 before taxes during the next year. Use the total cost as the cost definition in the cost-plus formula