Bouchard Company manufactures a product that currently has a full cost of $700. Its target operating income per unit is $50 and management's budgets assume that same target operating income per unit for the foreseeable future. To stay competitive, Bouchard management believes it must cut its price by 15%. What will be its new target price?
A) $700
B) $587.50
C) $637.50
D) $50

Question

Quizplus · Accepted Answer

The target operating income per unit is $50, so if we subtract that from the current full cost of $700, we get the current target price of $750. 
If we reduce this price by 15%, the new target price will be:

$750 - (15% x $750) = $637.50

Therefore, the correct answer is option C.

Bouchard Company Manufactures a Product That Currently Has a Full