Answer:
Oregon Equipment Company
Target Costing:
Conversion and Admin cost per unit = $2,147,000/5,000 = $429.40
Explanation:
a) Data and Calculations:
Sales Revenue $3,000,000 (5,000 x $600)
Cost of materials $300,000 (5,000 x $60)
Sales Commission $253,000 ($3,000 + (5,000 x $50)
Conversion & Admin cost $2,147,000
Target Profit $300,000
b)The Conversion and Admin. cost of $2,147,000:
= Sales Revenue minus cost of materials minus sales commission minus target profit.
c) The target cost is the cost that is required to make a target profit. This can be reversed with a target profit being worked out first before the target cost is achieved. The target cost then will be the difference between the sales minus the target profit, all other things being equal.
