Dugout Water Products sells 2000 kayaks per year at a price of $450 per unit.Dugout sells in a highly competitive market and uses target pricing.The company has $990,000 of assets,and the shareholders wish to make a profit of 16% on assets.Assume all products produced are sold.What is the target full product cost?

Question

Quizplus · Accepted Answer

The target profit is 16% of $990,000, which is $158,400. The total revenue from selling 2000 kayaks at $450 each is $900,000. Therefore, the target full product cost is $900,000 - $158,400 = $741,600.

Dugout Water Products Sells 2000 Kayaks Per Year at a Price