Target Costing
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 $700 each. An independent catalog company would handle sales for an annual fee of $1,000 plus $30 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $70 per unit.
If company management desires a return equal to 10 percent of the final selling price, what is the target unit cost? Round answer to the nearest cent. $Answer