Reference no: EM133061980
Question - AQG Limited (AQG) manufactures flat screen television panels and is in the process of developing a new 85-inch OLED display panel. The company expects its sale life to be five years, with sales averaging 10,000 units per year.
The 85-inch OLED display panel is currently in the design and development phase and the engineering department has identified the costs associated with the panel as follows:
Total production per year is 10,000 units; production is for five years.
Material costs $1,200 per unit.
Variable labour costs $450 per unit.
Variable overhead costs $500,000 per year.
Administration and marketing overhead costs fixed at $850,000 per year.
15% contribution margin required.
The marketing department has advised AQG that the maximum selling price they will achieve for this product is $1,800.00 per unit. In order to achieve this, the company will need to review its target cost.
Required - How much will AQG need to reduce its variable costs per unit to achieve the target cost?
A. $255.
B. $270.
C. $130.
D. $170.
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