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Paddle Paradise, Inc. sells 2500 canoes per year at a sales price of $450 per unit. It sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $820,000 per year. Fixed costs are $340,000 per year and cannot be reduced. What is the target variable cost per unit assuming units sold are equal to units produced?a. $328b. $136c. $192d. $464

Respuesta :

Answer:

c. $192

Step-by-step explanation:

The total cost of $820,000 consist of a fixed and variable element. The fixed element is constant (as noted in the question) however, the total variable cost element is the product of the number of Canoes produced and the variable cost per unit.

Let,

Y = target full cost  X = fixed costs a = variable cost per unit and b = number of canoes produced

Therefore,

Y  = X + ab

[tex]820000 = 340000 + (a*2500)\\

Collect like terms

\\2500a = 820000-340000\\2500a = 480000\\

Divide both sides of the equation by 2500\\

a = \frac{480000}{2500}[/tex]

a =192

Therefore, the variable cost per unit is $192. Option c

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