5. Washington Corporation sells a product for $400 per unit. Its market share is

ID: 2472080 • Letter: 5

Question

5. Washington Corporation sells a product for $400 per unit. Its market share is 35 percent of the units

sold. The marketing manager believes that the market share can be increased to 40 percent of the

units sold with a reduction in price to $350. The product is currently earning a profit of $60 per unit.

The president of Washington Corporation believes that his company needs to maintain the same profit

level per unit. The total market for the product has annual sales of 12,500 units.

Required:

a. How many dollars does Washington Corporation currently sell of the product each year?

b. What is the target price per unit?

c. What is the target cost per unit?

Total Market Sales in Units= 12,500 units

Market Share of Washington Corporation= 12,500 x 40%=5,000 units

Selling Price= $400

Profit= $60

Cost = Selling Price- Profit= $400-$60=$360

How many dollars does Washington Corporation currently sell of the product each year?

=5,000 x $400= $2,000,000

What is the target price per unit?

Target Price =$350

What is the target cost per unit?

Target cost =Target Price- Target Profit

$ 350-$60=$290

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