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Calculating a Target Cost Yuhu manufactures cell phones and is developing a new model with a feature (aptly named Don’t Drink and Dial) that prevents the phone from dialing an owner-defined list of phone numbers between the hours of midnight and 6:00 A.M. The new phone model has a target price of $350. Management requires a 20 percent profit on new product revenues. Required: 1. Calculate the amount of desired profit. 2. Calculate the target cost.

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Calculating a Target Cost Yuhu manufactures cell phones and is developing a new model with a feature (aptly named Don’t Drink and Dial) that prevents the phone from dialing an owner-defined list of phone numbers between the hours of midnight and 6:00 A.M. The new phone model has a target price of $350. Management requires a 20 percent profit on new product revenues.

Required:

1. Calculate the amount of desired profit.

2. Calculate the target cost.

 

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Managerial Accounting: The Cornerstone of Business Decision-Making
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