Asked by Aliyana Shivji on Jun 17, 2024
Verified
Wenner Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $44 per unit, management projects sales of 10,400 units. The new product would require an investment of $904,000. The desired return on investment is 10%.The desired profit according to the target costing calculations is:
A) $90,400
B) $367,200
C) $45,760
D) $457,600
Target Costing
A pricing strategy in which a company determines the potential selling price of a product before designing it and then subtracts a desired profit margin to arrive at a target cost.
Desired Profit
The target amount of net income that a company aims to achieve in a specific period.
- Apply the principle of target costing to project desired profits and set pricing strategies.
Verified Answer
RG
Rachel GarciaJun 22, 2024
Final Answer :
A
Explanation :
The desired profit is calculated as the investment ($904,000) multiplied by the desired return on investment (10%), which equals $90,400.
Learning Objectives
- Apply the principle of target costing to project desired profits and set pricing strategies.
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