Back Bay Company Is a Price-Taker and Uses Target Pricing

question 69

Multiple Choice

Back Bay Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | r | l | } \hline \text { Production volume } & 602,000 & \text { units per year } \\\hline \text { Market price } & \$ 32 & \text { per unit } \\\hline \text { Desired operating income } & 17 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,700,000 & \\\hline\end{array}$$ What is the target full product cost per unit? (Round your answer to nearest cent.) Assume all units produced are sold.

• A) $32.00
• B) $28.13
• C) $5.44
• D) $26.56

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Definitions:

Principal

The original sum of money borrowed in a loan or the initial amount of investment before any earnings or interest is added.

Interest

The charge for borrowing money or the compensation paid to a lender by a borrower for the use of borrowed funds.

Total Assets

The sum of all resources owned by a company, including cash, inventory, property, and equipment, reflected on the balance sheet.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.