sparks stationay company is a price taker and uses target pricing. the company h

Question

sparks stationay company is a price taker and uses target pricing. the company has just done an analysis of its revenue cost , and desired profits and has calculated its targetfull products cost. assumed produce are sold. refer to the following information.

target full product cost. $520,000 per year

actual fix cost                $280,000 per year

actual variable.                           $2 per year

production value.             152,000 per units per year

actual cost are currently higher than target full price cost. assuming that fix cost cannot be reduced. what is the variable cost for unit. Round your answer to the nearest cent

Explanation / Answer

Let the targeted variable cost per unit be x

Targeted product cost = Fixed cost + Variable cost

520000 = 280000+152000*X

152000X = 520000-280000

152000X = 240000

X = 240000/152000 i.e 1.5789

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