A custom kitchen cabinet storeowner wishes to use target profit pricing to establish a price for a typical section of cabinets.Assume variable cost is $200 per unit,fixed cost is $44,000,and a target profit of $10,000 on a volume of 400 cabinets is desired.What should be charged for a typical cabinet section?
A)$335.00
B)$310.00
C)$455.00
D)$398.00

Question

Quizplus · Accepted Answer

Total cost = Variable cost + Fixed cost = $200 x 400 + $44,000 = $84,000Target profit = $10,000Target price = Total cost + Target profit = $84,000 + $10,000 = $94,000Price per cabinet section = Target price / Volume = $94,000 / 400 = $335.00

A Custom Kitchen Cabinet Storeowner Wishes to Use Target Profit