Answer the following questions using the information below:
Block Island TV currently sells large televisions for $360. It has costs of $280. A competitor is bringing a new large television to market that will sell for $300. Management believes it must lower the price to $300 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 100,000 televisions per year.
-What is the target cost per unit if target operating income is 25% of sales?
A) $75
B) $90
C) $225
D) $270

Question

Quizplus · Accepted Answer

The target cost per unit is calculated by subtracting the target operating income from the sales price. The target operating income is 25% of the sales price, which is $300. Therefore, the target operating income per unit is $300 * 25% = $75. The target cost per unit is $300 - $75 = $225.

Answer the Following Questions Using the Information Below