Percival Company wishes to sell wooden beams to home builders. The current market price of the beams is $950, and Percival knows it must accept the market price. The company wishes to make a profit equal to 16% of the price. Using target costing, the company will have to design the production process to meet this requirement. What is the desired target cost per beam?

Question

Quizplus · Accepted Answer

To find the target cost, subtract the desired profit from the market price. Desired profit is 16% of $950, which is $152. Therefore, the target cost is $950 - $152 = $798.

Percival Company Wishes to Sell Wooden Beams to Home Builders