A new product is being designed by an engineering team at Gray Security.Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology.An analysis of similar products on the market suggests a price of $135 per unit.The company requires a profit of 30% of selling price.How much is the target cost per unit?
A)$175.50
B)$81.00
C)$40.50
D)$94.50

Question

Quizplus · Accepted Answer

Target cost per unit = selling price per unit - desired profit per unit
Target cost per unit = $135 - (30% of $135)
Target cost per unit = $135 - $40.50
Target cost per unit = $94.50

Therefore, the target cost per unit is $94.50, which is option D.

A New Product Is Being Designed by an Engineering Team