Hanisch Corporation Would Like to Use Target Costing for a New

question 134

Multiple Choice

Hanisch Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $22 per unit, management projects sales of 50,000 units. The new product would require an investment of $400,000. The desired return on investment is 14%. The target cost per unit is closest to:

• A) $22.00
• B) $23.80
• C) $20.88
• D) $25.08

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Definitions:

Transfer Price

The price at which goods or services are sold between divisions within the same company.

External Market

The environment outside a business in which it operates, dealing with the supply, demand, and pricing of goods and services.

Variable Manufacturing Cost

Costs that vary directly with the level of production output, such as raw materials and direct labor.

Revenue Centre Manager

A manager responsible for generating income and overseeing the revenue generation activities of a particular business unit, without direct control over costs or investments.