Regal Kitchens,Inc.,is considering the production of a new kitchen vent system.The Marketing Department has determined that there would be demand for the product at or below a selling price of $150 per unit.Anticipated unit costs are as follows:
Regal uses the following activity-based costs:
$\begin{array}{ll}
\text { Materials handling } & 120 \% \text { of direct material } \
\text { Production } & \$ 7.00 \text { per machine hour } \
\text { Shipping and handling } & \$ 10 \text { per unit }
\end{array}$ The company's desired profit is 25 percent over total production and shipping costs.
Calculate the target cost for this product and determine whether or not it should be produced.

Question

Regal Kitchens,Inc.,is considering the production of a new kitchen vent system.The Marketing Department has determined that there would be demand for the product at or below a selling price of $150 per unit.Anticipated unit costs are as follows:
  Regal uses the following activity-based costs:
 $\begin{array}{ll}
\text { Materials handling } & 120 \% \text { of direct material } \
\text { Production } & \$ 7.00 \text { per machine hour } \
\text { Shipping and handling } & \$ 10 \text { per unit }
\end{array}$ The company's desired profit is 25 percent over total production and shipping costs.
Calculate the target cost for this product and determine whether or not it should be produced.

Quizplus · Accepted Answer

The Answer of Regal Kitchens,Inc.,is considering the production of a new kitchen vent system.The Marketing Department has determined that there would be demand for the product at or below a selling price of $150 per unit.Anticipated unit costs are as follows:
  Regal uses the following activity-based costs:
 $\begin{array}{ll}
\text { Materials handling } & 120 \% \text { of direct material } \
\text { Production } & \$ 7.00 \text { per machine hour } \
\text { Shipping and handling } & \$ 10 \text { per unit }
\end{array}$ The company's desired profit is 25 percent over total production and shipping costs.
Calculate the target cost for this product and determine whether or not it should be produced.

Regal Kitchens,Inc The Company's Desired Profit Is 25 Percent Over Total Production