Answer the following questions using the information below:
Silicon Technologies, currently sells 17" monitors for $270. It has costs of $210. A competitor is bringing a new 17" monitor to market that will sell for $230. Management believes it must lower the price to $230 to compete in the market for 17" monitors. Silicon believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Silicon's sales are currently 5,000 monitors per year.
-What is the target cost if the target operating income is 25% of sales?
A) $230.00
B) $207.00
C) $172.50
D) $115.00

Question

Quizplus · Accepted Answer

The target cost is calculated by subtracting the target operating income from the target sales price. The target operating income is 25% of the sales price, which is $230. Therefore, the target operating income is $230 * 25% = $57.50. The target cost is then $230 - $57.50 = $172.50.

Answer the Following Questions Using the Information Below