Peacock, Inc. sells 2,100 kayaks per year at a sales price of $500 per unit. It sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $820,000 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?

The target variable cost per unit assuming units sold are equal to units produced is $228.571

Explanation:

The formula to compute the target variable cost per unit is shown below:

= Target variable cost : number of kayaks sold

where,

Target variable cost = Target full product cost - Fixed costs

= $820,000 - $340,000

= $480,000

And, the number of kayaks sold is 2,100

Now put these values to the above formula

So, the per unit would equal to

= $480,000 : 2,100

= $228.571