CIMA Exam CIMAPRO19-P02-1 Topic 6 Question 83 Discussion

Company X is considering the launch of a new product. In order to compete in the market the selling price must be $100 per unit. Company X aims to achieve a sales margin of 25 per cent.

Direct materials cost is $75 for each unit. It takes 15 minutes for workers to assemble each unit. Workers are paid $16 per hour. 5 per cent of paid time is idle. Overheads are absorbed at $6.50 per unit.

What is the value of any cost gap between the forecast total cost and the target cost?