Sonora,Inc

Multiple Choice

Sonora,Inc.is launching a new product that it estimates will sell for $25 per unit.Annual demand is estimated to be 70,000 units.Sonora estimates that using its current manufacturing technology,it can manufacture the units for $23 per unit,but if it purchases a new machine,the units can be manufactured for $22 per unit.Sonora has a target profit of 20% return on sales.Under target costing,what is the target cost for the new product?

A) $20
B) $22
C) $23
D) $25