Question

Back Bay Company is a price−taker and uses target pricing. Refer to the following​ information:Production volume602,000units per yearMarket price$34per unitDesired operating income17​%of total assetsTotal assets$13,800,000What is the target full product cost per​ unit? (Round your answer to nearest​ cent.) Assume all units produced are sold.

Answer 1

Answer: $30.10 per unit

Step-by-step explanation:

Given that,

Production volume = 602,000 units per year

Market price = $34 per unit

Desired operating income = 17​% of total assets

Total assets = $13,800,000

Total income = 17% of Total assets

= 0.17 × $13,800,000

= $2,346,000

Total sales = Market price × Production volume

= $34 per unit × 602,000 units

= $20,468,000

Target full product cost in total for the year:

= Total sales - Total income

= $20,468,000 - $2,346,000

= $18,122,000

Target full product cost per​ unit =
`(Target\ full\ product\ cost)/(Production\ volume)`

=
`(18,122,000)/(602,000)`

= $30.10 per unit