The management of Brockington Corporation is considering introducing a new product--a compact barbecue. At a selling price of $80 per unit, management projects sales of 70,000 units. Launching the barbecue as a new product would require an investment of $400,000. The desired return on investment is 15%. The target cost per barbecue is closest to:
A)$79.14
B)$92.00
C)$91.01
D)$80.00

Question

Quizplus · Accepted Answer

The desired return on investment is 15% of $400,000, which is $60,000. The total revenue from sales is 70,000 units * $80 = $5,600,000. The target cost is calculated as (Total Revenue - Desired ROI) / Number of Units = ($5,600,000 - $60,000) / 70,000 = $79.14.

The Management of Brockington Corporation Is Considering Introducing a New