A company is developing a new motorcycle. The team developing the car includes representatives from marketing, engineering and cost accounting. The team has developed a set of features that it plans to incorporate in this new motorcycle. The team believes that $5000 will be an attractive price for this product. The company seeks to earn a per unit profit of 30 percent of selling price.
a.) calculate the target cost per unit.
b.) The team has estimated that the costs associated with the product will be $2,000,000 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 taret cost per unit?
c.) Suppose the company decides that only $1,400 units can be sold at a price of $5000 and therefore, the target cost cannot be reached. THe company is considering dropping a feature, which adds $600 of variable cost per unit. With this feature dropped, the company believes it can sell 2,500 units at $4000 per unit. Will the company be able to produce the item at the new taret cost, or less?