Schopp Company makes swimsuits and sells these suits directly to retailers. Although Schopp 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 $115. Given its experience, Schopp believes the All-Body suit would have the following manufacturing costs.
- Direct materials $26
- Direct labor 27
- Manufacturing overhead 49
- Total costs $102
1. Assume that Schopp uses cost-plus pricing, setting the selling price 20% above its costs. What would be the price charged for the All-Body swimsuit? (Round answer to 2 decimal places, e.g. 10.50.)
$__________
2. Assume that Schopp uses target costing. What is the price that Schopp would charge the retailer for the All-Body swimsuit? (Round answer to 2 decimal places, e.g. 10.50.)
$__________
3. What is the highest acceptable manufacturing cost Schopp would be willing to incur to produce the All-Body swimsuit, if it desired a profit of $27 per unit? (Assume target costing.)
$___________