Straus Company,a manufacturer of electronic products,wants to introduce a new calculator.To compete effectively,the calculator could not be priced at more than $40.The company requires a 20% rate of return on investment on all new products.In order to produce and sell 30,000 calculators each year,the company would have to make an investment of $850,000.What would be the target cost per calculator?
A) $16.50.
B) $23.50.
C) $28.33.
D) $34.33.

Question

Quizplus · Accepted Answer

The target cost per calculator is calculated by first determining the required return on investment, which is 20% of $850,000, equaling $170,000. Adding this to the investment gives a total revenue requirement of $1,020,000. Dividing this by the 30,000 calculators gives a target cost of $34.33 per calculator.

Straus Company,a Manufacturer of Electronic Products,wants to Introduce a New