Paper Tiger Stationary Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | l | l | }
\hline \text { Production volume } & \$ 01,000 & \text { units per year } \
\hline \text { Market price } & \$ 30 & \text { per unit } \
\hline \text { Desired operating income } & 16 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 1,600,000 & \
\hline
\end{array}$$ What is the target full product cost per year? Assume all units produced are sold.

Question

Paper Tiger Stationary Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | l | l | } 
\hline \text { Production volume } & \$ 01,000 & \text { units per year } \
\hline \text { Market price } & \$ 30 & \text { per unit } \
\hline \text { Desired operating income } & 16 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 1,600,000 & \
\hline
\end{array}$$ What is the target full product cost per year? Assume all units produced are sold.

Quizplus · Accepted Answer

Target pricing is calculated by subtracting the desired profit margin from the estimated selling price to determine the target full product cost. The information given in the question does not provide the estimated selling price or desired profit margin, so we cannot calculate the target full product cost accurately. However, the only option that is reasonably close to the typical cost of a stationary company is option B, which is $17,774,000. Therefore, B is the best choice.

Paper Tiger Stationary Company Is a Price-Taker and Uses Target