Baldwin Produces Bicycles in a Highly Competitive Market $\text { E) None of the above }$

Baldwin produces bicycles in a highly competitive market. During the past year, the company has added a 20% markup on the $300 manufacturing cost for one of its most popular models. A new competitor recently entered the market with a competitive model that is priced at $320, seriously eroding Baldwin's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales.

If target costing is used, which of the following choices correctly denotes (1) Baldwin's selling price and (2) Baldwin's target cost?
$\begin{array}{lll}&\text { Selling Price}&\text { Target Cost }\\\text { A) } & \$ 360 & \$ 288 \\\text { B) } & \$ 360 & \$ 256 \\\text { C) } & \$ 320 & \$ 256 \\\text { D) } & \$ 320 & \$ 288\end{array}$
$\text { E) None of the above }$

A) Option A
B) Option B
C) Option C
D) Option D
E) Option E