This Question 6 pts 35 of 39 9 complete Revolve Company is a

This Question: 6 pts 35 of 39 (9 complete) Revolve Company is a price-taker and uses a target-pricing approach. Refer to the following information: Production volume Market price Desired operating income Total assets 602,000 uts per year per unit i5% of total assets $30 $13,900,000 What is the target full product cost in total for the year? Assume all units produced are sold O A. $13,900,000 B. $90,300 O C. $2,085,000 O D. $15,975,000

Solution

Target full product cost in total for the year D. $ 15,975,000 Working: a. Calculation of net profit Net profit = Total Assets x Return on Assets = $       13,900,000 x 15% = $           2,085,000 b. Calculation of Total sales revenue Total Sales revenue = Units sold x market price per unit = 602000 x $ 30 = $       18,060,000 c. Calculation of target costs in total Target total cost = Total Sales revenue - Target net profit = $       18,060,000 - $ 2,085,000 = $       15,975,000