A new product,an automated crepe maker,is being introduced at Laguna Corporation.At a selling price of $52 per unit,management projects sales of 90,000 units.Launching the crepe maker as a new product would require an investment of $200,000.The desired return on investment is 15%.The target cost per crepe maker is closest to:
A)$59.80
B)$52.00
C)$59.42
D)$51.67

Question

Quizplus · Accepted Answer

The target cost is calculated by subtracting the desired return on investment from the selling price. Desired ROI = $200,000 * 15% = $30,000. Total revenue = 90,000 units * $52 = $4,680,000. Target cost = (Total revenue - Desired ROI) / 90,000 units = ($4,680,000 - $30,000) / 90,000 = $51.67.

A New Product,an Automated Crepe Maker,is Being Introduced at Laguna