Problem: Go-yo is a company that designs, manufactures, and markets the world's best competition yo-yos. The company's engineers have designed a new product to be manufactured using a titanium bearing. Such a design will permit the user to accomplish more sophisticated tricks resulting from the yo-yo's ability to "sleep" for longer periods of time.
Market research has determined that customers will pay $225 for such a product. A margin of 30% (based on the selling price) is required.
Questions:
Q1. Calculate the target cost for Go-yo's new yo-yo.
Q2. If the estimated cost to product the product exceeds the target cost, what options are available to Go-yo's management?