Agway Company sells a product in a competitive marketplace. Market analysis indicates that their product would probably sell at $28.00 per unit. Agway Company management desires a profit equal to a 25% rate of return on invested assets of $1,400,000. They anticipate selling 50,000 units. Its current full cost per unit for the product is $25 per unit.
a. What is the desired profit per unit for Agway Company?
b. What is the expected selling price for Agway Company using a target costing approach?
c. What is the target cost per unit for Agway Company?

Question

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The Answer of Agway Company sells a product in a competitive marketplace. Market analysis indicates that their product would probably sell at $28.00 per unit. Agway Company management desires a profit equal to a 25% rate of return on invested assets of $1,400,000. They anticipate selling 50,000 units. Its current full cost per unit for the product is $25 per unit.
a. What is the desired profit per unit for Agway Company?
b. What is the expected selling price for Agway Company using a target costing approach?
c. What is the target cost per unit for Agway Company?

Agway Company Sells a Product in a Competitive Marketplace