Peacock, Inc sells 2,000 kayaks per year at a sales price of $460 per unit
It sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $810,000 per year. Fixed costs are $340,000 per year and cannot be reduced. What is the target variable cost per unit assuming units sold are equal to units produced?
A) $235
B) $405
C) $575
D) $170
A .A)
Target full product cost $810,000
Less: Fixed costs 340,000
Target variable costs $470,000
Target variable cost per unit = $470,000 / 2,000 units = $235
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