Paddle Paradise, Inc. sells 2 comma 000 canoes per year at a sales price of $ 470 per unit. It sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $ 800 comma 000 per year. Fixed costs are $ 320 comma 000 per year and cannot be reduced. What is the target variable cost per unit assuming units sold are equal to units produced

Target unitary variable cost = $240 per unit

Explanation:

Giving the following information:

Sales in units = 2,000

Selling price = $470

Total cost = $800,000 per year

Fixed costs = $320,000 per year.

First, we need to calculate the total variable cost:

Total variable cost = total cost - total fixed costs

Total variable cost = 800,000 - 320,000

Total variable cost = 480,000

Now, we can calculate the target unitary variable cost:

Target unitary variable cost = 480,000/2,000

Target unitary variable cost=$240 per unit