Fantabulous Products sells 2,000 kayaks per year at a price of $450 per unit. Fantabulous sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $720,000 per year. Total variable costs are $330,000 per year and cannot be reduced. How much are the target fixed costs?

Question

Quizplus · Accepted Answer

Using the target pricing formula, we can find the target fixed costs:
Target Full Product Cost = Total Variable Costs + Target Fixed Costs
$720,000 = $330,000 + Target Fixed Costs
Target Fixed Costs = $720,000 - $330,000 = $390,000
Therefore, the target fixed costs are $390,000. Answer choice D is correct.

Fantabulous Products Sells 2,000 Kayaks Per Year at a Price