Question

Fantabulous Products sells 2,100 kayaks per year at a price of $ 460 per unit. Fantabulous sells in a highly competitive market and uses target pricing. The company has $990,000 of? assets, and the shareholders wish to make a profit of 16?% on assets. Assume all products produced are sold. What is the target full product? cost?

Answer 1

$807,600

Explanation:

Data provided:

Number of products sold per year = 2,100

Per unit price of the product = $460

Company's assets = $990,000

Target profit percentage = 16%

The total sales for the year

= Number of products sold per year × Per unit price of the product

The total sales for the year = 2,100 × $460 = $966,000

Now,

the target net income = total sales × target profit percentage

or

the target net income = $990,000 × 0.16 = $158,400

Therefore,

the target full product cost = Total sales - target net income

or

the target full product cost = $966,000 - $158,400 = $807,600