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Target costing The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a six-year life cycle. After conducting market research the company found that the product could sell for $800 per unit in the first four years of life and for $650 per unit for the last two years. Unit sales are expected to be as follows: Year 1 3480 Year 2 3132 Year 3 4089 Year 4 4350 1.305 Year a 870 Per-unit variable selling costs are estimated at $140 throughout the product's life; total fixed selling and administrative costs over the six years are expected to be 53.700,000. Cleveland Furniture Mfg desires a profit margin of 15 percent of selling price per unit a. Compute the life cycle target cost to manufacture the product. (hound to the nearest cent) Note: Round your answer to two decimal places De, round $2.4555 to $2.463 10 per unit b. if the company expects the product to cost $430 to manufacture in the first year, what is the upper bound for manufacturing cost in the following five years! Note: Round your answer to two decimal places (Le, round $2.4555 to $2.46) 10 per unit

Target costing The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a six-year life cycle. After conducting market research the company found that the product could sell for $800 per unit in the first four years of life and for $650 per unit for the last two years. Unit sales are expected to be as follows: Year 1 3480 Year 2 3132 Year 3 4089 Year 4 4350 1.305 Year a 870 Per-unit variable selling costs are estimated at $140 throughout the product's life; total fixed selling and administrative costs over the six years are expected to be 53.700,000. Cleveland Furniture Mfg desires a profit margin of 15 percent of selling price per unit a. Compute the life cycle target cost to manufacture the product. (hound to the nearest cent) Note: Round your answer to two decimal places De, round $2.4555 to $2.463 10 per unit b. if the company expects the product to cost $430 to manufacture in the first year, what is the upper bound for manufacturing cost in the following five years! Note: Round your answer to two decimal places (Le, round $2.4555 to $2.46) 10 per unit

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Target costing The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a six-year life cycle. After conducting market research the company found that the product could sell for $800 per unit in the first four years of life and for $650 per unit for the last two years. Unit sales are expected to be as follows: Yeart 3.480 Year 2 3132 Year 3 4085 Year 44350 Year 5 1.305 Year & 870 Per-unit variable selling costs are estimated at $140 throughout the product's life; total fixed selling and administrative costs over the six years are expected to be 53.700,000. Cleveland Furniture Mfg desires a profit margin of 15 percent of selling price per unit. a. Compute the life cycle target cost to manufacture the product. (Round to the nearest cent) Note: Round your answer to two decimal places pe, round $2.4555 to $2.40) 50 per unit b. If the company expects the product to cost $430 to manufacture in the first year, what is the upper bound for manufacturing cost in the following five years? Note: Round your answer to two decimal places (le, round $2.4555 to $2.46) $0 per unit
Transcribed Image Text:Target costing The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a six-year life cycle. After conducting market research the company found that the product could sell for $800 per unit in the first four years of life and for $650 per unit for the last two years. Unit sales are expected to be as follows: Yeart 3.480 Year 2 3132 Year 3 4085 Year 44350 Year 5 1.305 Year & 870 Per-unit variable selling costs are estimated at $140 throughout the product's life; total fixed selling and administrative costs over the six years are expected to be 53.700,000. Cleveland Furniture Mfg desires a profit margin of 15 percent of selling price per unit. a. Compute the life cycle target cost to manufacture the product. (Round to the nearest cent) Note: Round your answer to two decimal places pe, round $2.4555 to $2.40) 50 per unit b. If the company expects the product to cost $430 to manufacture in the first year, what is the upper bound for manufacturing cost in the following five years? Note: Round your answer to two decimal places (le, round $2.4555 to $2.46) $0 per unit
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