Jaybird Company operates in a highly competitive market where the market price for its product is $62 per unit. Jaybird desires a $22 profit per unit. Jaybird expects to sell 6,200 units. Additional information is as follows: Variable product cost per unit $ 19 Variable administrative cost per unit 12 Total fixed overhead 57,000 Total fixed administrative 30,000 To achieve the target cost per unit, Jaybird must reduce total expenses by how much?

The cost of production must decrease by $5 per unit.

Explanation:

Giving the following information:

Selling price = $62 per unit.

Jaybird desires a $22 profit per unit.

Jaybird expects to sell 6,200 units.

Variable product cost per unit $ 19

Variable administrative cost per unit 12

Total fixed overhead 57,000

Total fixed administrative 30,000

First, we need to calculate the unitary cost of production:

Unitary cost = 19 + 12 + (57,000+30,000) / 6,200 = $45

Target cost = 62-22 = $40

The cost of production must decrease by $5 per unit.