Rocky River Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | r | l | }
\hline \text { Production volume } & 602,000 & \text { units per year } \
\hline \text { Market price } & \$ 34 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 & \
\hline
\end{array}$$ What is the target full product cost per unit? (Round your answer to nearest cent.)Assume all units produced are sold.

Question

Rocky River Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Production volume } & 602,000 & \text { units per year } \
\hline \text { Market price } & \$ 34 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 & \
\hline
\end{array}$$ What is the target full product cost per unit? (Round your answer to nearest cent.)Assume all units produced are sold.

Quizplus · Accepted Answer

The target full product cost per unit is calculated by subtracting the desired operating income per unit from the market price. Desired operating income per unit is 17% of total assets divided by production volume: (0.17 * $13,900,000) / 602,000 = $3.93. Therefore, target cost per unit = $34 - $3.93 = $30.07.

Rocky River Company Is a Price-Taker and Uses Target Pricing