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

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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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
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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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