136. Airflow Company sells a product in a competitive marketplace. Market analysis indicates that their product would probably sell at $28.00 per unit. Airflow management desires a profit equal to a 20% rate of return on invested assets of $1,400,000. They anticipate selling 50,000 units. Their current full cost per unit for the product is $25 per unit.
(1) What is the amount of profit per unit?
(2) What is the target cost per unit if they meet the market dictated price and management’s desired profit?
137. Match each of the following terms with the best definition given.
1. Combines market-based pricing with a cost reduction emphasisProduction bottleneck
2. ConstraintTarget costing
3. Only costs of manufacturing are included in product cost per unitProduct cost concept
4. Sets the price according to competitorsCompetition-based concept
5. Sets the price according to demandDemand-based concept
138. Match each of the following terms with the best definition given.
1. Includes manufacturing cost plus selling and administrative expenses.Total cost concept
2. Variable manufacturing costs plus variable selling and administrative costs are included in cost per unit Normal selling price
3. Target selling price to be achieved in the long term.Variable cost concept
139. Match each of the following terms with the best definition.
1. Evaluation of how income will change based on an alternative course of action.Opportunity cost
2. Revenue forgone from an alternative use of an asset.Theory of constraints
3. Strategy that focuses on reducing bottlenecks.Sunk cost
4. Not relevant to future decisions.Differential analysis
140. Carillion Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $290,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.
Prepare a differential analysis report, dated June 15 of the current year, on whether the equipment should be leased or sold.