Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs)is $18.00. Clark's production costs are shown below: The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, what is the company's target cost per unit?

Question

Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs)is $18.00. Clark's production costs are shown below:    The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, what is the company's target cost per unit?

Quizplus · Accepted Answer

Target cost per unit = Market price per unit - Desired profit per unit
Desired profit per unit = 5% of market price per unit = 0.05 x $18 = $0.90
Target cost per unit = $18.00 - $0.90 = $17.10

Therefore, the company's target cost per unit is $17.10. Choice C is the correct answer.

Clark Manufacturing Makes Blank CDs; It Is a Very Competitive