Murray Products sells 2,100 kayaks per year at a price of $450 per unit
Murray 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 17% on assets. Fixed costs are $450,000 per year and cannot be reduced. Assume all products produced are sold. What are the target variable costs?
A) $132,040
B) $990,000
C) $776,700
D) $326,700
D .D)
Revenue at market price (2,100 x $450 ) $945,000
Less: Desired profit ($990,000 x 17%) 168,300
Target full product cost $776,700
Less: Fixed costs 450,000
Target variable costs $326,700
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