Blair Stationery Company is a price - taker and uses target pricing. The company

Question

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

Explanation / Answer

Total target variable costs= total full product cost- total fixed cost=

=510,000-250,000=260,000

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