Action Toys has a new video game cassette for the upcoming holiday season.It is trying to determine the target cost for the game if the selling price per unit will be set at $60,the going price for video games,and the firm wants to earn a target operating income of 15% of sales.What will be the target cost per unit for the new game?
A) $60
B) $51
C) $27
D) $9

Question

Quizplus · Accepted Answer

Target operating income = 15% of sales
Let x be the target cost per unit.
Selling price per unit = $60
Target operating income per unit = 15% x $60 = $9
Target cost per unit = Selling price per unit - Target operating income per unit
x = $60 - $9
x = $51
Therefore, the target cost per unit for the new game is $51.

Action Toys Has a New Video Game Cassette for the Upcoming