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

Exercise 38

Target Costing and Pricing

Dino’s, Inc., makes a variety of T-shirts with logos. The company has discovered a new market for sweatshirts with logos. Market research indicates that a sweatshirt like this would sell well in the market priced at $25 each. Dino’s desires an operating profit of 25 percent of costs.

Required

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