Green Lawn Corporation wants to produce a new lawnmower. The financial data is as follows:
Other information:
$\begin{array}{lr}
\text { Target price: } & \$ 450 \
\text { Target profit: } & \$ 75 \
\text { Estimated cost given current product and process designs: } & \$ 400
\end{array}$ 1.
Through reverse engineering, Green Lawn found a design improvement that would save $10 per unit.
2.
It also found that it could purchase a similar component of a different brand at a lower price, which would save $20 per unit.
-Refer to the Figure.What is Green Lawn's target cost?

Question

Green Lawn Corporation wants to produce a new lawnmower. The financial data is as follows:
Other information:
 $\begin{array}{lr}
\text { Target price: } & \$ 450 \
\text { Target profit: } & \$ 75 \
\text { Estimated cost given current product and process designs: } & \$ 400
\end{array}$ 1.
Through reverse engineering, Green Lawn found a design improvement that would save $10 per unit.
2.
It also found that it could purchase a similar component of a different brand at a lower price, which would save $20 per unit.
-Refer to the Figure.What is Green Lawn's target cost?

Quizplus · Accepted Answer

The target cost is calculated by subtracting the target profit from the target price. Here, the target price is $450, and the target profit is $75, so the initial target cost is $450 - $75 = $375. The cost savings from design improvement and purchasing a similar component at a lower price ($10 + $20 = $30) are not subtracted from the target cost but are measures to achieve the target cost.

Green Lawn Corporation Wants to Produce a New Lawnmower 1 Through Reverse Engineering, Green Lawn Found a Design Improvement

Green Lawn Corporation Wants to Produce a New Lawnmower 1
Through Reverse Engineering, Green Lawn Found a Design Improvement