Target Costing (LO3)

Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 5,000 log-splitting machines per year at a retail price of $600 each. An independent catalog company would handle sales for an annual fee of $2,000 plus $50 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $80 per unit.

Required If company management desires a return equal to 10 percent of the fihal selling price, what is the target unit cost?

 LO.1