Well-Bread Grain Company Is a Price-Taker and Uses Target Pricing

question 9

Multiple Choice

Well-Bread Grain Company is a price-taker and uses target pricing.The company has just done an analysis of its revenues,costs,and desired profits and has calculated its target full product cost.Assume all products produced are sold.Refer to the following information: $$\begin{array} { | l | l | l | } \hline \text { Target full product cost } & \$ 520,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 281,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 2 & \text { per unit } \\\hline \text { Production volume } & 150,000 & \text { units per year } \\\hline\end{array}$$ Actual costs are currently higher than target full product cost.Assuming that fixed costs cannot be reduced,what is the target variable cost per unit? (Round your answer to the nearest cent.)

• A) $3.47
• B) $1.59
• C) $1.87
• D) $2.00

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Definitions:

Idle Rpm

The rotational speed of an engine (in revolutions per minute) when it is idling, or running without any load or acceleration.

Coaxial Spring

A type of spring system where two or more springs are arranged along a common axis, usually one inside the other.

Friction Discs

Components within a mechanical clutch that provide the necessary friction to transfer torque from the driving to the driven shaft, often made of materials that improve grip and durability.

Torsional Shock

A sudden and extreme twist or strain on a mechanical component due to rapid torque variation.