Question

Treason Solutions is considering using the target costing method to determine a selling price for one of its new products. An analysis of similar products on the market suggests a price of $150 each. If the company requires a profit of $82 per unit, what target cost should be set for the new product?

Answer 1

The target cost for Treason Solutions' new product would be $68 per unit, calculated by subtracting the desired profit of $82 from the suggested selling price of $150.

Step-by-step explanation:

Treason Solutions is using the target costing method to set a price for its new product. To calculate the target cost, we must subtract the desired profit per unit from the determined selling price. With a required profit of $82 per unit and a market-based suggested selling price of $150, the target cost per unit would be:

Target Cost = Selling Price - Desired Profit

Target Cost = $150 - $82

Target Cost = $68

Therefore, Treason Solutions should set a target cost of $68 per unit for their new product to meet their profit goal.