Sid\'s Skins makes a variety of covers for electronic organizers and portable mu

Question

Sid's Skins makes a variety of covers for electronic organizers and portable music players. The company's designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $22.50. Sid's desires an operating profit of 25 percent of costs.

Required:

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

Explanation / Answer

operating profit=1/4 of costs=1/5 of sales value

=(1/5*22.5)=$4.5

Costs+operating profit=Sales

Hence  highest acceptable manufacturing cost=(22.5-4.5)

=$18

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