Symphony Sound, is designing a portable recording studio to be sold to consumers. The team developing the product includes representatives from marketing, engineering, and cost accounting. The recording studio set will include sound-canceling monitor headphones, audio recording and enhancement software, several instrumental and vocal microphones, and portable folding acoustic panels. With this set of features, the team believes that a price of $4,000 will be attractive in the market place. Symphony Sound seeks to earn a per unit profit of 20 percent of selling price.
a. Calculate the target cost per unit.
b. The team has estimated that the fixed production costs associated with the production costs associated with the product will be $1,860,000 and variable costs to produce and sell the item will be $2,500 per unit. In light of this how many units must be produced and sold to meet the target cost per unit?