Answer the following questions using the information below:
Frank's Computer Monitors, Inc., currently sells 17" monitors for $270. It has costs of $210. A competitor is bringing a new 17" monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17" monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank's sales are currently 10,000 monitors per year.
-Action Toys has a new video game cassette for the upcoming holiday season. It is trying to determine the target cost for the game if the selling price per unit will be set at $60, the going price for video games, and the firm wants to earn a target operating income of 12% of sales. What will be the target cost per unit for the new game?
A)$48.00
B)$52.80
C)$53.57
D)$67.20

Question

Quizplus · Accepted Answer

The target cost per unit is calculated by subtracting the desired operating income from the selling price. The desired operating income is 12% of the selling price, which is $60. Therefore, the target cost per unit is $60 - ($60 * 0.12) = $52.80.

Answer the Following Questions Using the Information Below