A firm's investment cost is $50 million; and its target return on investment is 15 percent. If the standard volume is 100,000 units and average total costs (at standard volume) equal $25 per unit, the company's target price equals $100.

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Quizplus · Accepted Answer

The target price is calculated as follows:Target price = (Standard volume * Average total costs) / (1 - Target return on investment)= (100,000 * $25) / (1 - 0.15)= $2,941,176 / 0.85= $100

A Firm's Investment Cost Is $50 Million; and Its Target