Pedrotti Corporation Would Like to Use Target Costing for a New

question 5

Multiple Choice

Pedrotti Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $28 per unit, management projects sales of 30,000 units. The new product would require an investment of $300,000. The desired return on investment is 17%. The target cost per unit is closest to:

• A)$32.76
• B)$26.30
• C)$28.00
• D)$30.77

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Definitions:

Millions

A numerical value or unit representing one million units of a currency or indicating a quantity of one million in number.

Cash Flow

The total accounting of funds moving in and out of a business, directly affecting its capability to remain solvent.

Stockholders

Individuals or entities that own shares in a corporation, giving them partial ownership.

New Debt

Funds a company borrows through the issuance of debt instruments, such as bonds or loans, as a way to finance operations or projects.