Target Costingoregon Equipment Company Wants To Develop A New Logsplitting Machine For Rural Homeowners

Question

Target Costing

Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners.

Market research has determined that the company could sell 5,000 log-splitting machines per year at a retail price of $700 each. An independent catalog company would handle sales for an annual fee of $3,000 plus $40 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $90 per unit.

If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent. $Managerial Accounting