Answer the following questions using the information below:
Elliott Manufacturing has decided to produce a new interior door to complement its exterior door line.The new door is expected to sell for $60 each,and the annual target sales volume for the doors is 20 000.Elliott has target operating profit of 20% of sales.
-What is the target cost for each interior door?
A)$48
B)$58
C)$45
D)$60

Question

Quizplus · Accepted Answer

To calculate the target cost, we need to subtract the target operating profit (20% of sales price) from the selling price. 
Target operating profit = 20% x $60 = $12
Target cost = Selling price - Target operating profit = $60 - $12 = $48

Therefore, the target cost for each interior door is $48.

The best choice is to produce the door for $48, as this will allow Elliott Manufacturing to achieve their target operating profit of 20% while still selling the door at the desired price of $60.

Answer the Following Questions Using the Information Below