Question

Bond co. is using the target cost approach on a new product. information gathered so far reveals: expected annual sales 400,000 units desired profit per unit $0.35 target cost $168,000 what is the target selling price per unit? $0.35 $0.42 $0.77 $0.70

Answer 1

The target selling price per unit is $0.77.

We use the following formula to arrive at the answer.

Revenues = Total Costs + (Desired Profit per unit *Expected Annual sales)

= $168,000 + ($0.35*400,000)

= $168,000 + $140,000

Revenues = $308,000

Selling Price per unit = Revenues / Expected Annual Sales

= $308,000 / 400,000

= $0.77