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Target Costing.
Portland Equipment Company wants to develop a new long-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $850 each. An independent catalog company would handle sales for an annual fee of $6,000 plus $59 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $95 per unit.
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