Paddle Paradise, Inc. sells 2,000 canoes per year at a sales price of $ 460 per unit. It sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $ 810,000 per year. Fixed costs are $ 320,000 per year and cannot be reduced. What is the target variable cost per unit assuming units sold are equal to units produced?

Target variable cost per unit of Paddle Paradise, Inc. is $245 per canoe

Explanation:

From the question, we have the following information:

Projected Units sold = Projected Units produced = 2,000 canoes;

Targeted total costs of production = $810,000;

Total fixed cost = $320,000;

To compute the targeted total variable costs of 2,000 canoes:

Targeted total variable cost = Targeted total production cost - Total fixed cost = $810,000 - $320,000 = $490,000;

To compute the targeted variable cost per canoe as followed:

Targeted variable cost per canoe = total variable cost / number of canoe produced = $490,000 / 2,000 = $245 per canoe.

Thus, Paddle Paradise, Inc.'s targeted variable cost per canoe is $245.