Sales of Granite City Products Inc. have been on a steady decline for the last 1

Question

Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $500 as opposed to the current market price charged of $600 per unit. Granite City Products Inc, has decided to revise its sales price to $500. The annual sales target volume of the product after price revision is 200 units. Granite City Products Inc. wants to earn 40% on its sales amount. What is the total target cost? A. $140.000 O B. $40,000 OC. $60,000 D. $100.000

Explanation / Answer

(a) Total sales =$500*200 $100,000 Total Profit = 40% of sales amount $40,000 Total cost = Total sales - Total Profit = $100,000 - $40,000 $60,000 (b) Change in Current operating profit = Change in total sales - Change in cost = (9.25 - 8.5) * (72000 - 79000) - 0       (5,250) D. Decrease ny $5,250

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