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Swifty Corporation plans to introduce a new product and is using the target cost approach. Projected sales revenue is $850500 ($4.05 per unit) and target costs are $821250. What is the desired profit per unit

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abiolataiwo2015

Based on the information given the desired profit per unit is $0.14 per unit.

First step is to find the unit using this formula

Units=Target sales revenue / Target selling price per unit

Units=$850500 / $4.05

Units =210,000

Second step is to calculate the  desired profit per unit using this formula

Desired profit per unit=Target selling price per unit - (Target costs / Units)

Desired profit per unit=$4.05-($821250 / 210,000)

Desired profit per unit=$4.05- $3.91

Desired profit per unit=$0.14

Inconclusion the desired profit per unit is $0.14 per unit.

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