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. $25
B. $23
C. $20
D. $22
Answer: C
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