The selling price of a product has been set at $300 per unit, and at that price the company expects to sell 1,000 units per year. The company requires a return of 20% p.a. on its investment of $1,250,000 in the product. What is the target cost per unit? (006 x 300=300,000

The selling price of a product has been set at $300 per unit, and at that price the company expects to sell 1,000 units per year. The company requires a return of 20% p.a. on its investment of $1,250,000 in the product. What is the target cost per unit? (006 x 300=300,000

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.16E

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

(uso
rget cost gap?
20%, of 450O,000
90,000
o-90,00O
Target cost
+450,000
360,000
Tca =400,000 - 360,000
unit
31000xy00 pe6
E400,000
TC
%3D
40,000
achriue), Hiw
QUESTION-7
The selling price of a product has been set at $300 per unit, and at that price the company
expects to sell 1,000 units per year.
The company requires a return of 20% p.a. on its investment of $1,250,000 in the product.
What is the target cost per unit?
300,000
elliney price p
profit
= 1006 X 300 =
1,250,000 = 50,000
300,000 - So,000
20% x
Tanget cost =
= 250,000
250 per units
1000
cost
olk3i

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