Back Bay Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | r | l | }
\hline \text { Production volume } & 602,000 & \text { units per year } \
\hline \text { Market price } & \$ 32 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,700,000 & \
\hline
\end{array}$$ What is the target full product cost per unit? (Round your answer to nearest cent.)Assume all units produced are sold.

Question

Back Bay Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Production volume } & 602,000 & \text { units per year } \
\hline \text { Market price } & \$ 32 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,700,000 & \
\hline
\end{array}$$ What is the target full product cost per unit? (Round your answer to nearest cent.)Assume all units produced are sold.

Quizplus · Accepted Answer

The target full product cost per unit can be calculated by subtracting the desired profit per unit from the market price. First, calculate the desired operating income: 17% of total assets = 0.17 * $13,700,000 = $2,329,000. Then, divide this by the production volume to find the profit per unit: $2,329,000 / 602,000 units = $3.87 per unit. Finally, subtract this from the market price to find the target cost per unit: $32.00 - $3.87 = $28.13.

Back Bay Company Is a Price-Taker and Uses Target Pricing