Determinant Company is a price-taker and uses a target-pricing approach.Refer to the following information: $$\begin{array} { | l | l | l | }
\hline \text { Production volume } & 501,000 & \text { units per year } \
\hline \text { Market price } & \$ 34 & \text { per unit } \
\hline \text { Desired operating income } & 15 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 & \
\hline
\end{array}$$ What is the target full product cost in total for the year? Assume all units produced are sold.

Question

Determinant Company is a price-taker and uses a target-pricing approach.Refer to the following information: $$\begin{array} { | l | l | l | } 
\hline \text { Production volume } & 501,000 & \text { units per year } \
\hline \text { Market price } & \$ 34 & \text { per unit } \
\hline \text { Desired operating income } & 15 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 & \
\hline
\end{array}$$ What is the target full product cost in total for the year? Assume all units produced are sold.

Quizplus · Accepted Answer

Target full product cost = Market price * Production volume - Desired operating income= $34 * 501,000 - 15% * $13,900,000= $17,034,000 - $2,085,000= $18,349,000

Determinant Company Is a Price-Taker and Uses a Target-Pricing Approach