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 $500 as opposed to the current market price charged of $600 per unit. Granite City Products Inc. has decided to revise its sales price to $500. The annual sales target volume of the product after price revision is 200 units. Granite City Products Inc. wants to earn 40% on its sales amount.
What is the total target cost?

Question

Quizplus · Accepted Answer

The target sales revenues is $100,000 ($500 × 200).
The target operating income is $40,000 ($100,000 × 40%).
The target cost is $60,000 ($100,000 - $40,000).