Problem:
Morrow Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows.
Morrow has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace. The prevailing market price is $33.00.
Required:
Question 1: Compute the current selling price of part no. 67.
Question 2: If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?
Note: Please show the work not just the answer.