Clark Manufacturing Makes Blank CDs; It Is a Very Competitive

Multiple Choice

Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs) is $18.00. Clark's production costs are shown below:
Direct materials $5.00 per unit
Direct labor $2.90 per unit
Indirect production costs $6.42 per unit
Non-manufacturing costs $3.20 per unit
Clark uses activity-based costing for its indirect production costs and provides the following information about this particular product:
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The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, how much cost reduction does the company need to achieve its objective?

A) $0.90
B) $0.34
C) $0.42
D) $0.62