ProDry is entering the professional hair dryer market. Research shows that their customers wish to pay $310 or less for each dryer. Cost accountants at the manufacturer have collected the following information:

Required

1. What is the estimated cost per unit for ProDry?
2. What is the range of prices that ProDry could charge to make a profit?
3. Assume that ProDry’s target operating income per unit is $165. What is the target cost for the dryer?
4. What can the company do to achieve its target cost calculated in requirement 3?
5. Should the target cost calculated in requirement 3 include all costs (direct, and variable and fixed overhead)? Why or why not?

Transcribed Image Text:

Direct material/unit Direct labor/unit Variable overhead Fixed costs (annually) Estimated production for year one 69 69 $ $ 50 30 30 $206,250 3,750