Hostetter Corporation Would Like to Use Target Costing for a New

question 36

Multiple Choice

Hostetter Corporation would like to use target costing for a new product it is considering introducing. At a selling price of $30 per unit, management projects sales of 30,000 units. The new product would require an investment of $200,000. The desired return on investment is 13%. The target cost per unit is closest to:

• A) $32.92
• B) $30.00
• C) $33.90
• D) $29.13

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Definitions:

Accruals

Accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash transaction takes place.

Unrecorded Expense

An expense that has been incurred but not yet documented or reported in the accounting records.

Unrecorded Revenue

Revenue that has been earned but has not yet been documented in the accounting records.

Revenues

The income generated from normal business operations, often from the sale of goods and services to customers.