Arnold Company produces handheld calculators, and their manufacturing cost is currently $5.80 per unit. The company also has non- manufacturing costs of $1.20 per unit. Arnold employs target pricing strategy, and the current market price is $8.00 per unit. If Arnold wishes to price their product at a 25% markup over full- product cost, what must they do?

Question

Quizplus · Accepted Answer

To achieve a 25% markup on full-product cost, the full-product cost must be reduced to $6.40 per unit ($8.00 / 1.25). The current full-product cost is $7.00 ($5.80 + $1.20), so it must be reduced by $0.60.

Arnold Company Produces Handheld Calculators, and Their Manufacturing Cost Is