Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $420 as opposed to the current market price charged of $520 per unit. Granite City Products Inc. has decided to revise its sales price to $420. The annual sales target volume of the product after price revision is 280 units. Granite City Products Inc. wants to earn 30% on its sales amount.
What is the target operating income?

Question

Quizplus · Accepted Answer

The target sales revenues is $117,600 ($420 × 280).
The target operating income is $35,280 ($117,600 × 30%).