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Target costing methodology

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A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $125.00 per unit. The company requires a profit of 0.19 of selling price. How much is the target cost per unit?

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Solution Summary

Target cost per unit is equal to price per unit minus the required profit per unit.

$2.19