Peacock Inc.sells 2,500 kayaks per year at a price of $500 per unit.It sells in a highly competitive market and uses target pricing.The company has calculated its target full product cost at $820,000 per year.Fixed costs are $350,000 per year and cannot be reduced.How much is the target variable cost per unit assuming units sold are equal to units produced?

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Quizplus · Accepted Answer

Target variable cost per unit = (Target full product cost - Fixed costs) / Units sold= ($820,000 - $350,000) / 2,500= $188