16) J-Time Inc. is planning to launch a new brand of watches for kids. Similar watches are available in the market for $50. In order to penetrate the market, the company plans to use target pricing and desires a 20% net profit markup on total cost. Calculate the target cost.
1.20x = $50
17) Jetz Inc. manufactures water bottles for children. Similar water bottles are available in the market for $5. Jetz desires a 20% net profit margin. Jetz's target cost is ________.
18) Cilia Corp. specializes in the production of finials which is mostly sold within the territory. The selling price for each finial is $15. Using the traditional allocation method to allocate manufacturing overhead, the full-product cost is determined to be $10. The company recently introduced activity-based costing method to allocate its overhead. The refinement of costs shows that the full-product cost is less by $2.50 from the traditional estimate.
1. Calculate and analyze the change in net profit percentage as a result of introduction of activity-based costing.
2. The desired net profit margin of the company is 60%. If the production costs cannot be reduced, by how much should the selling price be increased in order to achieve the desired profit? (Use the cost estimates under activity-based costing.)
19) Ferrero Corp. manufactures gourmet dips along with potato chips flavored with Cajun spices. The market price for similar chips is $7. The management of the company desires a 30% net profit margin.
The current costing data relating to this product are as follows.