Question

Rocky River Company is a pricetaker and uses target pricing. Refer to the following information:Production volume 602,000​ units per yearMarket price $34​ per unitDesired operating income 17% of total assetsTotal assets $13,900,000​ ​What is the target full product cost per unit? (Round your answer to nearest cent.) Assume all units produced are sold.a. $34.00b. $30.07c. $5.78d. $28.22

Answer 1

Answer:

$30.07

Explanation:

Rocky river company uses target pricing

The production volume is 602,000 units

The market price is $34 per unit

The total assets is $13,900,000

The desired operating income is 17% of the total assets

= 17/100 × 13,900,000

= 0.17×13,900,000

= 2,363,000

The first step is to calculate the sales value

= 602,000 ×34

= 20,468,000

The total cost can be calculated as follows

= Sales value-desired operating income

= 20,468,000-2,363,000

= 18,105,000

Therefore the target full product cost per unit can be calculated as follows

= Total cost/production volume

= 18,105,000/602,000

= $30.07

Hence the full target product cost per unit is $30.07