Xtech Games Inc. has a new video game cassette for the upcoming holiday season. It is trying to determine the target cost for the game if the selling price per unit will be set at $70, the going price for video games, and the firm wants to earn a target operating income of 30% of sales. What will be the target cost per unit for the new game?
A) $70
B) $49
C) $30
D) $21

Question

Quizplus · Accepted Answer

The target operating income is $21 i.e. 30% of $70. Therefore, the target cost per unit will be $49 ($70 - $21 ).