Solution-To what level does variable cost per unit need

To what level does variable cost per unit need

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Reference no: EM131786454

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(Not a repeat question.) The New Product Development Team at Mattel Inc. has developed a new version of the Barbie doll for the upcoming holiday season - "Holiday Barbie". Their market research suggests that they can sell approximately 500,000 units of Holiday Barbie at a price of $13.50/unit to retail stores. The variable production costs are $4.50/unit and total fixed costs are expected to be $3,600,000. In order for the new design to enter production, the target profit on the new doll must equal 30% each year on Mattel's capital investment. The total required investment is $3,600,000.

If the number of units sold and selling price per unit cannot be increased beyond the current projection, to what level does variable cost per unit (currently $4.50) need to be reduced in order to ensure the 30% return on capital? (Ignore minor rounding.)

$0.36
$4.14
$3.84
Some other number.
Cannot be computed from information provided.

Reference no: EM131786454

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To what level does variable cost per unit need

Reference no: EM131786454

Reference no: EM131786454

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