R.U. Bald is considering the introduction of a new deluxe toupee. The toupee wil

Question

R.U. Bald is considering the introduction of a new deluxe toupee. The toupee will be waterproof in that it will be made from a combo of water buffalo fur and duck down. Market research indicates that customers would be willing to pay $800 for the toupee. R.U. Bald requires 25% return on sales for all its products.

Compute R.U. Bald's target cost for the toupee under consideration.

$______?

if R.U. Bald changes its target return on this deluxe toupee to be 20% instead of 25% what will be the target cost, assuming the sales price remains at $800

$_____?

Assume that R.U. Bald is also considering a toupee with a lower price point. Made from recycled pocket lint, these will retail for only $125. Assuming R.U. Bald requires 25% returns on sales of this product, what is the target cost?

$____?

Explanation / Answer

Compute R.U. Bald's target cost for the toupee under consideration. 800*(1-.25) = 600 answr: 600 if R.U. Bald changes its target return on this deluxe toupee to be 20% instead of 25% what will be the target cost, assuming the sales price remains at $800 $_____? 800*(1-.20) = 640 answr: 640 Assume that R.U. Bald is also considering a toupee with a lower price point. Made from recycled pocket lint, these will retail for only $125. Assuming R.U. Bald requires 25% returns on sales of this product, what is the target cost? $____? 125*(1-.25) = 93.75 answer: 93.75

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