After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 21,000. Magnificent has target operating income of 20% of sales.
What is the target cost?

Question

Quizplus · Accepted Answer

Estimated sales revenue = $240 × 21,000 units = $5,040,000.
Target operating income = $5,040,000 × 20% = $1,008,000.
Target cost = $5,040,000 - $1,008,000 = $4,032,000.

After Conducting a Market Research Study, Magnificent Manufacturing Decided to Produce