EXERCISE 8 - EXERCISE 8-1(a The target cost formula is...

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EXERCISE 8-1 (a) The target cost formula is: Target cost = Market price – Desired profit In this case, the market price is $15 and the desired profit is $4.50 (30% X $15). Therefore the target cost is $10.50 ($15.00 – $4.50) (b) Target costing is particularly helpful when a company faces a competitive market. In this case, the price is affected by supply and demand, so no company in the industry can affect price. Therefore to earn a profit, companies must focus on controlling costs. EXERCISE 8-4 (a) Total cost per unit: Per Unit Direct materials. ........................................................................... Direct labor. .................................................................................. Variable manufacturing overhead. ............................................. Fixed manufacturing overhead ($360,000/30,000). ..................................................................... Variable selling and administrative expenses.
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EXERCISE 8 - EXERCISE 8-1(a The target cost formula is...

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