1. Battista Stationery Company is a price - taker and uses target pricing. The c
ID: 2467115 • Letter: 1
Question
1. Battista Stationery Company is a price - taker and uses target pricing. The company has completed an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Refer to the following information:
Target full product cost $500, 000 per year
Actual fixed cost $280, 000 per year
Actual variable cost $3 per unit
Production volume 150, 000 units per year
Actual costs are currently higher than target full product cost. Assume all products produced are sold. Assuming that variable costs are dependent on commodity prices and cannot be reduced, what is the target fixed cost?
A. $450, 000
B. $220, 000
C. $50, 000
D. $500, 000
2. Blair Stationery Company is a price - taker and uses target pricing. The company has just done an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Assume all products produced are sold. Refer to the following information:
Target full product cost $510, 000 per year
Actual fixed cost $250, 000 per year
Actual variable cost $2 per unit
Production volume 151, 000 units per year
Actual costs are currently higher than target full product cost. Assuming that fixed costs cannot be reduced, what are the target total variable costs?
A. $302, 000
B. $510, 000
C. $260, 000
D. $250, 000
3. Sparks Stationery Company is a price - taker and uses target pricing. The company has just done an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Assume all products produced are sold. Refer to the following information:
Target full product cost $500, 000 per year
Actual fixed cost $280, 000 per year
Actual variable cost $3 per unit
Production volume 151, 000 units per year
Actual costs are currently higher than target full product cost. Assuming that fixed costs cannot be reduced, what is the target variable cost per unit? (Round your answer to the nearest cent.)
A. $1.46
B. $3.00
C. $1.85
D. $3.31
Explanation / Answer
1. Option C $ 50,000 is the correct answer.
Target full product costs $ 500,000
Variable cost 150,000 units @ $ 3 = $ 450,000 (this cannot change)
Therefore target fixed cost has to be $ (500,000 - 450,000) = $ 50,000
2.Option C $ 260,000 is the correct answer.
Target full product cost is $ 510,000.
Actual fixed cost is $ 250,000 which caanot be reduced.
Therefore target total variable cost is $ ( 510,000 - 250,000) = $ 260,000
3. The correct option is A $ 1.46 variable cost per unit.
Target full production cost is $ 500,000
Actual fixed cost is $ 280,000, which cannot be reduced.
Therefore total target variable cost per unit cannot exceed $ 220,000/151,000 =$ 1.46
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