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A new product is being designed by an engineering team at Odin Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $140 per unit. The company requires a profit of 35 percent of selling price.
Required:
a. What is the target cost per unit?
b. The members of the team subsequently determine that the product cannot be produced for the cost calculated in part a. What is the next step in the target costing process? Does the new product get eliminated from consideration now?
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