Target has decided to discontinue manufacturing its Quantum model personal organizer. Currently the company has...
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Target has decided to discontinue manufacturing its Quantum model personal organizer. Currently the company has a number of partially completed personal organizers on hand. The company has spent $105 per unit to manufacture these organizers. To complete each unit, costs of $14 for material and $17 for direct labor will be incurred. In addition, $10 of variable overhead and $29 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be added per unit. If Target, completes the organizers, it can sell them for $142 per unit. Another manufacturer is interested in purchasing the partially completed organizers for $115 per unit and converting them into inventory tracking devices.
What is the incremental profit per unit Target needs to consider as it evaluates the two alternatives?
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