Problem 8-9 Macaron Plumbing Fixtures is developing a preplumbed acrylic shower unit. The team developing the product includes representatives from marketing, engineering, and cost accounting. To date, the team has developed a set of features that it plans to incorporate in the unit, including a seat, two shower heads, four body sprays, and a steam unit. With this set of features, the team believes that a price of $4,900 will be attractive in the marketplace. Macaron seeks to earn a per unit profit of 30 percent of selling price.

Calculate the target cost per unit.

Target cost

$ per unit

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The team has estimated that the fixed production costs associated with the product will be $2,430,000, and variable costs to produce and sell the item will be $2,430 per unit. In light of this, how many units must be produced and sold to meet the target cost per unit?

Units produced and sold

units

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Suppose the company decides that only 1,250 units can be sold at a price of $4,900 and, therefore, the target cost cannot be reached. The company is considering dropping the steam feature, which adds $890 of variable cost per unit. With this feature dropped, the company believes it can sell 2,430 units at $4,200 per unit. Will Macaron be able to produce the item at the new target cost or less?

New target cost per unit		$
New cost per unit		$

Macaron

will bewill not be

able to produce the item at the new target cost or less.