Flagler Electronics currently sells a camera for $240. An aggressive competitor has announced plans for a similar product that will be sold for $205. Flagler's marketing department believes that if the price is dropped to meet competition, unit sales will increase by 10%. The current cost to manufacture and distribute the camera is $175, and Flagler has a profit goal of 20% of sales. If Flagler meets competitive selling prices, what is the company's target cost?
A) $41.
B) $48.
C) $164.
D) $175.
E) $192.

Question

Quizplus · Accepted Answer

The target cost can be calculated by taking the competitive selling price ($205) and subtracting the desired profit margin (20% of $205). The desired profit is $41 (20% of $205), so the target cost is $205 - $41 = $164.

Flagler Electronics Currently Sells a Camera for $240