Target Costing
Utah Utensil has developed a new kitchen utensil. The firm has conducted significant market research and estimated the following pattern for sales of the new product:
|
Year |
Expected Volume (units) |
Expected Price per unit |
|
1 |
48,000 |
19 |
|
2 |
48,000 |
20 |
|
3 |
90,000 |
16 |
|
4 |
40,000 |
12 |
If the firm desires to net $3.50 per unit in profit over the life of the product, and selling and administrative expenses are expected to average $50,000 per year, what is the target cost to produce the new utensil?