Question

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?

Answer 1

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

Step-by-step 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.