On Point, Inc., is interested in producing and selling a deluxe electric pencil
ID: 2507835 • Letter: O
Question
On Point, Inc., is interested in producing and selling a deluxe electric pencil sharpener. Market research indicates that customers are willing to pay $40 for such a sharpener and that 20,000 units could be sold each year at this price. The cost to produce the sharpener is currently estimated to be $34.
If On Point requires a 20 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener? (Omit the "$" sign in your response.)
If a competitor sells basically the same sharpener for $36, what would On Point's target cost be to maintain a 20 percent return on sales? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
a.If On Point requires a 20 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener? (Omit the "$" sign in your response.)
Explanation / Answer
On Point, Inc., is interested in producing and selling a deluxe electric pencil sharpener. Market research indicates that customers are willing to pay $40 for such a sharpener and that 20,000 units could be sold each year at this price. The cost to produce the sharpener is currently estimated to be $34.
If On Point requires a 20 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener? (Omit the "$" sign in your response.)
If a competitor sells basically the same sharpener for $36, what would On Point's target cost be to maintain a 20 percent return on sales? (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
a.If On Point requires a 20 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener? (Omit the "$" sign in your response.)
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