Fantabulous Products sells 2200 kayaks per year at a price of $480 per unit.Fantabulous sells in a highly competitive market and uses target pricing.The company has $1,000,000 of assets and the shareholders wish to make a profit of 16% on assets.How much is the target full product cost?

Question

Quizplus · Accepted Answer

The target profit is 16% of $1,000,000, which is $160,000. The total revenue from selling 2200 kayaks at $480 each is $1,056,000. The target full product cost is the total revenue minus the target profit, which is $1,056,000 - $160,000 = $896,000.

Fantabulous Products Sells 2200 Kayaks Per Year at a Price