Fantabulous Products sells 2,000 kayaks per year at a price of $450 per unit.Fantabulous sells in a highly competitive market and uses target pricing.The company has calculated its target full product cost at $720,000 per year.Total variable costs are $330,000 per year and cannot be reduced.How much is the target fixed costs?

Question

Quizplus · Accepted Answer

We can use the target costing formula to calculate the target fixed cost:

Target Fixed Cost = Target Full Product Cost - Total Variable Cost
Target Fixed Cost = $720,000 - $330,000
Target Fixed Cost = $390,000

Therefore, the target fixed cost for Fantabulous Products is $390,000. Therefore, the answer is D, and it is the best choice.

Fantabulous Products Sells 2,000 Kayaks Per Year at a Price