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 $105. Given its experience, Hannon believes the All-Body suit would have the following manufacturing costs.
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Direct materials
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$25
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Direct labor
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35
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Manufacturing overhead
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44
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Total costs
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$104
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Assume that Hannon uses cost-plus pricing, setting the selling price 19% above its costs. What would be the price charged for the All-Body swimsuit?(Round answer to 2 decimal places, e.g. 10.50.)
Assume that Hannon uses target costing. What is the price that Hannon would charge the retailer for the All-Body swimsuit?
What is the highest acceptable manufacturing cost Hannon would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $16 per unit? (Assume target costing.)