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Target Costing
Utah Utensil has developed a new kitchen utensil. The firm has conducted significant market research and estimated the following pattern for sales of the new product:
Year
Expected Volume (units)
Expected Price per unit
1
48,000
19
2
20
3
90,000
16
4
40,000
12
If the firm desires to net $3.50 per unit in profit over the life of the product, and selling and administrative expenses are expected to average $50,000 per year, what is the target cost to produce the new utensil?
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