Final answer:
To meet the targeted cost given a desired profit margin, Robertson, Inc. needs to reduce its current manufacturing cost by $2 per unit. Option B is the correct answer.
Step-by-step explanation:
The student is asking about a concept in target costing within the context of business and accounting. The question provides details on the selling price, desired profit margin, and the current manufacturing cost of a product from Robertson, Inc. To determine the necessary cost reduction, we apply the target costing formula. Since the company wants a profit margin equal to 25% of sales, we calculate 25% of the selling price, which is $36. Therefore, the target profit is $9 per unit (25% of $36).
This means the target cost must be the selling price ($36) minus the target profit ($9), which is $27. Since the current manufacturing cost is $29 per unit, the firm will need to implement a cost reduction of $2 per unit to meet its targeted cost ($29 current cost - $27 target cost = $2). Thus, the correct answer is B. $2.