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Question - Leno Company makes swimsuits and sells these suits directly to retailers. Although Leno 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 $100. Given its experience, Leno believes the All-Body suit would have the following manufacturing costs.
Direct materials 23
Direct labor 32
Manufacturing overhead 45
Total costs$100
Assume that Leno uses cost-plus pricing, setting the selling price 23% above its costs. What would be the price charged for the All-Body swimsuit?
Assume that Leno uses target costing, what is the price that Leno would charge the retailer for the A-B body swimsuit?
What is the highest acceptable manufacturing cost Leno would be willing to incur to produce the swimsuit if it desired a profit of 26 per unit?
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