Illinois Company has budgeted the following costs for the production of its only product:
$\begin{array}{ll}
\text { Direct Materials } & \$ 35,000 \
\text { Direct Labor } & 25,000 \
\text { Variable indirect production costs } & 30,000 \
\text { Fixed indirect production costs } & 15,000 \
\text { Variable selling and administrative costs } & 7,500 \
\text { Fixed selling and administrative costs } & 12,500\
\text { Total Costs }&\$125,000
\end{array}$
Illinois Company has a target profit of $40,000.The company will produce 1,000 units.The market price is $160 per unit.What is the target cost per unit?
A) $40
B) $120
C) $125
D) $165

Question

Quizplus · Accepted Answer

The target cost per unit is calculated by subtracting the target profit per unit from the selling price per unit. The selling price is $160, and the target profit per unit is $40 ($40,000/1,000 units). Therefore, the target cost per unit is $120 ($160 - $40).

Illinois Company Has Budgeted the Following Costs for the Production