1. The management of Kozloff Corporation is considering introducing a new produc
ID: 2497750 • Letter: 1
Question
1. The management of Kozloff Corporation is considering introducing a new product--a compact barbecue. At a selling price of $74 per unit, management projects sales of 80,000 units. Launching the barbecue as a new product would require an investment of $800,000. The desired return on investment is 14%. The target cost per barbecue is closest to:
A.
$84.36
B.
$82.76
C.
$72.60
D.
$74.00
2.A new product, an automated crepe maker, is being introduced at Laguna Corporation. At a selling price of $52 per unit, management projects sales of 90,000 units. Launching the crepe maker as a new product would require an investment of $200,000. The desired return on investment is 15%. The target cost per crepe maker is closest to:
A.
$59.80
B.
$52.00
C.
$59.42
D.
$51.67
Explanation / Answer
1)Investment = $8,00,000
Target Profit = The desired return on investment
Target Profit = 14% of $800,000
=$112,000
..
Target Sales = 80,000*74
=$59,20,000
..
Therefore ,Target COst = Target Sales - Target Profit
= 59,20,000 - 112,000
= 58,08,000
..
Taget Cost per unit = 58,08,000/80,000
=$72.60 ...Option -C is the Correct answer.
..
..
2)Investment = $2,00,000
Target Profit = The desired return on investment
Target Profit = 15% of $200,000
=$30,000
..
Target Sales = 90,000*52
=$46,80,000
..
Therefore ,Target COst = Target Sales - Target Profit
= 46,80,000 - 30,000
= 46,50,000
..
Taget Cost per unit = 46,50,000/90,000
=$51.67 ...Option -D is the Correct answer.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.