Domingo Corporation makes a variety of headphones with logos. The company has di

Question

Domingo Corporation makes a variety of headphones with logos. The company has discovered a new market for wireless headphones with logos. Market research indicates that these headphones would sell well in the market priced at $37.20 each. Domingo desires an operating profit of 20 percent of costs.

Required:

What is the highest acceptable manufacturing cost for which Domingo would be willing to produce the headphones? (Round your answer to 2 decimal places.)

Explanation / Answer

Solution:

Accepted selling price in market for wireless headphones = $37.20

Desired operating profit = 20% on cost

Highest acceptable manufacturing cost for which Domingo would be willing to produce the headphones

= $37.20 / 120% = $31.00 per unit

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