Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $480 as opposed to the current market price charged of $580 per unit. Granite City Products Inc. has decided to revise its sales price to $480. The annual sales target volume of the product after price revision is 280 units. Granite City Products Inc. wants to earn 30% on its sales amount.
What is the target cost per unit?

Question

Quizplus · Accepted Answer

The target sales revenues is $134,400 ($480 × 280).
The target operating income is $40,320 ($134,400 × 30%).
The target cost is $94,080 ($134,400 - $40,320).
The target cost per unit is $94,080 / 280 = $336.00