Hannon Company makes swimsuits and sells these suits directly to retailers. Although Hannon has a variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $104. Given its experience, Hannon believes the All-Body suit would have the following manufacturing costs.
Direct materials $27 Direct labor 30 Manufacturing overhead
44
Total costs
$101
Assume that Hannon uses cost-plus pricing, setting the selling price 15% above its costs. What would be the price charged for the All-Body swimsuit?
Assume that Hannon uses target costing. What is the price that Hannon would charge the retailer for the All-Body swimsuit?