Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs) is $18.00. Clark's production costs are shown below:
Direct materials $5.00 per unit
Direct labor $2.90 per unit
Indirect production costs $6.42 per unit
Non-manufacturing costs $3.20 per unit
Clark uses activity-based costing for its indirect production costs and provides the following information about this particular product:
-
The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, what is the company's target cost per unit?
A) $18.40
B) $14.32
C) $17.10
D) $17.52

Question

Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs) is $18.00. Clark's production costs are shown below:
Direct materials $5.00 per unit
Direct labor $2.90 per unit
Indirect production costs $6.42 per unit
Non-manufacturing costs $3.20 per unit
Clark uses activity-based costing for its indirect production costs and provides the following information about this particular product: 
-
The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, what is the company's target cost per unit?
A) $18.40 
B) $14.32 
C) $17.10 
D) $17.52

Quizplus · Accepted Answer

B) *
C) Calculations: $18.00 - ($18.00 × 5%) = $17.10

Clark Manufacturing Makes Blank CDs; It Is a Very Competitive