Question
Carefully analyze the following hypothetical situation and answer what is required: XYZ Company wishes to invest $2,000,000 for the design, development, and production of a
Carefully analyze the following hypothetical situation and answer what is required:
XYZ Company wishes to invest $2,000,000 for the design, development, and production of a new model of blender. The accountants determine that the price cannot exceed $30/unit, which is the competitive price in the market. The company wishes to generate a minimum profit of 15% on the sale of this product and estimates that it will sell 40,000 units in the year.
1. Determine the cost-objective per unit (target cost) using the data presented.
2. Does the determined cost compare favorably with a cost determined based on 130% of the variable cost per unit, which is currently $18?
3. Is the cost efficient based on 130% of the variable cost per unit? Justify your position.
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