Launch Company sells 2200 paddleboards per year at a sales price of $470 per unit.Launch 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 17% on assets.Variable cost is $200 per unit and cannot be reduced.Assume all products produced are sold.What are the target fixed costs?

Question

Quizplus · Accepted Answer

The target profit is 17% of $900,000, which is $153,000. Total revenue is 2200 units * $470 = $1,034,000. Total variable cost is 2200 units * $200 = $440,000. Target fixed costs = Total revenue - Total variable cost - Target profit = $1,034,000 - $440,000 - $153,000 = $441,000.

Launch Company Sells 2200 Paddleboards Per Year at a Sales