#24 Hirohito Limited Partners would like to use target costing for a new product
ID: 2484527 • Letter: #
Question
#24
Hirohito Limited Partners would like to use target costing for a new product it is considering introducing. At a selling price of $21 per unit, management projects sales of 74,000 units. The new product would require an investment of $440,000. The desired return on investment is 16%.
The target cost per unit is closest to: (Round your answer to 2 decimal places.)
a. $20.05
b. $23.26
c. $21.00
d. $24.36
#24
Hirohito Limited Partners would like to use target costing for a new product it is considering introducing. At a selling price of $21 per unit, management projects sales of 74,000 units. The new product would require an investment of $440,000. The desired return on investment is 16%.
Explanation / Answer
Target Price per unit =( Total sales-Desired Profit)/No of Units sold
Total sales =(No of units sold x Selling Price per unit)
= 74,000 units x $21 per unit=$1,554,000
Desired profit=Total investment x desired return on investment %
= $440,000 x 16%=$70,400
Target Price per unit =( Total sales-Desired Profit)/No of Units sold
=($1,554,000-$70,400)/ 74,000=$1,483,600/74,000
=20.048( round to $20.05)
Hence Option A is correct
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