Well-Bread Grain Company is a price-taker and uses target pricing. The company has just done an analysis of its revenues, costs, and desired profits and has calculated its target full product cost. Assume all products produced are sold. Refer to the following information:
Target full product cost $500,000 per year
Actual fixed cost $280,000 per year
Actual variable cost $2 per unit
Production volume 150,000 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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