Target cost

Helot Co The following scenario relates to questions 26-30. Helot Co develops and sells computer games. It is well known for launching innovative and interactive role-playing games and its new releases are always eagerly anticipated by the gaming community. Customers value the technical excellence of the games and the durability of the product and packaging. Helot Co has previously used a traditional absorption costing system and full cost plus pricing to cost and price its products. It has recently recruited a new finance director who believes the company would benefit from using target costing. They are keen to try this method on a new game concept called Spartan, which has been recently approved. After discussion with the board, the finance director undertook some market research to find out customers' opinions on the new game concept and to assess potential new games offered by competitors. The results were used to establish a target selling price of S45 for Spartan and an estimated total sales volume of 350,000 units. Helot Co wants to achieve a target profit margin of 35% finance director has also begun collecting cost data for the new game and has projected the following: Production costs per unit 3.00 Direct material 2.50 Direct labour 5.05 Direct machining 0.45 Set up 4.30 Inspection and testing $'000 Total non-production costs 2,500 Design (salaries and technology) 1,700 Marketing consultants 1,400 Distribution The answer says it is 2.05 but i m getting a cost gap of 2.5. The total cost i got is 31.75 and the cost that book has arrived to is 31.30. The target cost is 29.25. This question is from mock exam 1 September 2016 BPP