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Summit Products,Inc.is interested in producing and selling an improved widget.Market research indicates that customers would be willing to pay $90 for such a widget and that 50,000 units could be sold each year at this price.The current cost to produce the widget is estimated to be $65.
-Summit has learned that a competitor plans to introduce a similar widget at a price of $80.In response,Summit may reduce its selling price to $80.If Summit requires a 25% return on sales,what is the target cost for the new widget?
A)$80.00
B)$60.00
C)$23.75
D)$20.00

Question

Quizplus · Accepted Answer

To achieve a 25% return on sales at a selling price of $80, the target cost must be 75% of $80, which is $60 (0.75 * $80 = $60).

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