Samples Corporation would like to use target costing for a new product it is considering introducing.At a selling price of $21 per unit, management projects sales of 20, 000 units.The new product would require an investment of $400, 000.The desired return on investment is 12%. The target cost per unit is closest to:
A)$21.00
B)$18.60
C)$23.52
D)$20.83

Question

Quizplus · Accepted Answer

Target cost = Anticipated selling price - Desired profit
= $21.00 per unit - ($48, 000 ÷ 20, 000 units)
= $21.00 per unit - $2.40 per unit = $18.60 per unit

Samples Corporation Would Like to Use Target Costing for a New