Polynesian Products sells 1,800 kayaks per year at a price of $480 per unit. Polynesian sells in a highly competitive market and uses target pricing. The company has $900,000 of assets and the shareholders wish to make a profit of 15% on assets. Variable costs are $220 per unit and CANNOT be reduced. How much are the target fixed costs?

Question

Quizplus · Accepted Answer

D) Calculations:
1,800 × $480 = $864,000
$900,000 × 15% = $135,000
$864,000 - $135,000 = $729,000
$729,000 - ($220 × 1,800) = $333,000

Polynesian Products Sells 1,800 Kayaks Per Year at a Price