Problem:
Target believes it can sell 3,500,000 of a new vehicle charger for $8 each. There will be $3,000,000 in fixed costs associated with the charger.
Required:
Question: If the company desires to make a profit of $2,000,000 on the charger, what is the target variable cost per charger?
$7.25
$9.00
$6.57
$9.40
Note: Provide support for rationale.