Discourse Stationery Company is a price-taker and uses target pricing. The company has completed an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Refer to the following information: Target full product cost $500,000 per year Actual fixed cost $270,000 per year Actual variable cost $3 per unit Production volume 140,000 units per year Actual costs are currently higher than target full product cost. Assume all products produced are sold. Assuming that variable costs are dependent on commodity prices and cannot be reduced, what is the target fixed cost?

Question

Business

Marcella

11 May, 02:44

Discourse Stationery Company is a price-taker and uses target pricing. The company has completed an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Refer to the following information: Target full product cost $500,000 per year Actual fixed cost $270,000 per year Actual variable cost $3 per unit Production volume 140,000 units per year Actual costs are currently higher than target full product cost. Assume all products produced are sold. Assuming that variable costs are dependent on commodity prices and cannot be reduced, what is the target fixed cost?

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Savanah Aguirre · Answer 1

Fixed cost = 80,000

Explanation:

Giving the following information:

Target full product costs $500,000 per year.

Actual fixed cost $270,000 per year

The actual variable cost $3 per unit

Production volume 140,000 units per year.

Target cost = 500,000

Variable cost = 420,000 (-)

Fixed cost = 80,000