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Question - Company A operates in a highly competitive market where the market price for its product is $50 per unit. Company A desires a $15 profit per unit. Company A expects to sell 5,000 units. Additional information is as follows:
Variable product cost per unit $15
Variable administrative cost per unit 10
Total fixed overhead 45,000
Total fixed administrative 18,000
Required -
a) Determine the target cost for Company A's product for it to achieve $15 profit per unit.
b) To achieve the target cost per unit, by how much must Company A reduce total expenses?
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