Rica Company is a price-taker and uses a target-pricing approach.Refer to the following information:
- What is the target full product cost in total for the year? Assume all units produced are sold.

Question

Rica Company is a price-taker and uses a target-pricing approach.Refer to the following information: 
- What is the target full product cost in total for the year? Assume all units produced are sold.

Quizplus · Accepted Answer

Using the given formula:
Target Full Product Cost = Total Fixed Cost + (Target Cost per Unit × Total Expected Units)

Total Fixed Cost = $5,580,000
Total Expected Units = 300,000
Target Cost per Unit = Target Selling Price per Unit - Target Operating
Margin per Unit
= $97 - $28 = $69

Target Full Product Cost = $5,580,000 + ($69 × 300,000) = $15,915,000

Therefore, the target full product cost for the year is $15,915,000. Option B is the correct answer.

Rica Company Is a Price-Taker and Uses a Target-Pricing Approach