Answer the following questions using the information below:
After conducting a market research study, Ed Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 20,000. Ed has target operating income of 20% of sales.
-What is the target cost for each interior door?
A) $288
B) $240
C) $192
D) $48

Question

Quizplus · Accepted Answer

The target operating income is 20% of sales, so the cost must be 80% of the sales price. Therefore, the target cost per door is 80% of $240, which is $192.

Answer the Following Questions Using the Information Below