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Target Costing

The document contains profit and cost information for several companies. Stone Company aims for $2.13 profit per unit at a selling price of $45 with target costs of $42.87 per unit. Millie Company targets $500,000 profit on $20 million in sales with a 10% rate of return. Laserspot targets $68 costs per unit. Joey's Recording Studio calculates costs, desired profit, and target price per session. Rita Corporation also calculates costs, desired return, mark-up percentage and target selling price. Goliath Company calculates variable and fixed costs per unit, desired return, mark-up and target selling price.

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144 views2 pages

Target Costing

The document contains profit and cost information for several companies. Stone Company aims for $2.13 profit per unit at a selling price of $45 with target costs of $42.87 per unit. Millie Company targets $500,000 profit on $20 million in sales with a 10% rate of return. Laserspot targets $68 costs per unit. Joey's Recording Studio calculates costs, desired profit, and target price per session. Rita Corporation also calculates costs, desired return, mark-up percentage and target selling price. Goliath Company calculates variable and fixed costs per unit, desired return, mark-up and target selling price.

Uploaded by

Poison Ivy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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STONE COMPANY

Desired profit (4Mx16%) 640,000.00


Divided by: Expected # of units to be sold 300,000.00
Desired profit per unit sold 2.13
Selling price 45.00
Target costs per unit 42.87

Expected sales (300,000x45) 13,500,000.00


Less: Desired profit (4Mx16%) 640,000.00
Target costs 12,860,000.00
Divided by: Expected # of units to be sold 300,000.00
Target costs per unit 42.87

MILLIE COMPANY
Target sales (100,000x200) 20,000,000.00
Total target costs (100,000x195) (19,500,000.00)
Target profit (Pesos) 500,000.00
Divided by: Total investment 5,000,000.00
Target rate of return 10%

LASERSPOT
Target sales (100,000x80) 8,000,000.00
Less: (7.5Mx16%) (1,200,000.00)
Total target cost 6,800,000.00
Divided by: 100,000.00
Target costs per unit 68.00

JOEY'S RECORDING STUDIO


1. DM 60.00
DL 400.00
FOH
Variable 50.00
Fixed (850,000/1,000) 850.00
Variable selling and admin expense 40.00
Fixed selling and admin expense (800,000/1,000) 800.00
Total cost per session 2,200.00

2. Total desired profit (2Mx16.50%) 330,000.00


Divided by: # seesions 1,000.00
Desired profit per sessions 330.00

3. Mark up percentage = profit unit /cost per unit = 330/2200 15.00%


4. Target price per sessions
Price 2,530.00
Profit 330.00
Target cost 2,200.00

RITA CORPORATION
1. DM 32.00
DL 54.00
FOH
Variable 72.00
Fixed (12M/400,000) 30.00
Variable selling and admin expense 34.00
Fixed selling and admin expense (7.2M/400,000) 18.00
Total costs 240.00

2. Desired ROI per unit (120Mx20%)/400,000 60.00

3. Mark-up percentage 25%

4. Total selling price (total cost + desired profit 300.00

GOLIATH COMPANY
1. Total variable cost per unit (30+40+10+6) 86.00
Total fixed cost per unit (1.8M+1.44)/60,000 54.00
Total cost per unit 140.00

2. Total cost per unit 140.00


Desired ROI 30%
Mark-up per unit 42.00

3. Total cost 140.00


Mark-up 42.00
Target selling price 182.00

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