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Dear Mr Moffat
I was doing the practice questions but I came across a for which I don t understand the answer provided. Could you please help.
Question (Target costing)
The selling price of product has been set at $300,00 per unit and at that price the company expect to sell 1000 units per year.
The company requires a return of 20% pa on investment of $1,250,000 in the product.
What is the target cost per unit?The correct answer is $250.
Should $250 be the return on investment? 1,250,000*20%/1000?
My answer was $50 (300-250)Could you please help?
Thanks
Gabriella
You are correct.
The answer does write that the target cost is $50, but the wrong letter has been typed by mistake. I will have it corrected. Sorry.
Dear Mr Moffat,
thanks a lot for your response
Have a nice day aheadBest Regards
Gabriella
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