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10 February, 06:39

Target Costing Portland Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $850 each. An independent catalog company would handle sales for an annual fee of $6,000 plus $59 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $95 per unit. If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent.

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  1. 10 February, 06:40
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    Answer:S 610

    Explanation:

    To get a return of 10% of sales price is to have a profit of S85 which is 10% of S850.

    Handling cost per unit S6000/6000 unit=S1

    Other handling cost per unit S59

    Raw materials per unit=S95

    Target conversations and administrative cost is

    850-X-60-95=85

    850-X-155=85

    -X=85+155-850

    -X=-610

    X=610
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