AQG Limited (AQG) manufactures flat screen television panels and is in the process of developing a new 85-inch OLED display panel. The company expects its sale life to be five years, with sales averaging 10,000 units per year.

The 85-inch OLED display panel is currently in the design and development phase and the engineering department has identified the costs associated with the panel as follows:

• Total production per year is 10,000 units; production is for five years.
• Material costs $1,200 per unit.
• Variable labour costs $450 per unit.
• Variable overhead costs $500,000 per year.
• Administration and marketing overhead costs fixed at $850,000 per year.
• 15% contribution margin required.

The marketing department has advised AQG that the maximum selling price they will achieve for this product is $1,800.00 per unit. In order to achieve this, the company will need to review its target cost.

How much will AQG need to reduce its variable costs per unit to achieve the target cost?

	A.	$255.
	B.	$270.
	C.	$130.
	D.	$170.