Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 37

Target Costing and Pricing

Sid’s Skins makes a variety of covers for electronic organizers and portable music players. The company’s designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $21. Sid desires an operating profit of 20 percent of costs.

Required

What is the highest acceptable manufacturing cost for which Sid’s would be willing to produce the cover?