Jester Company was making a product for $70 and selling it for $90.A competitor began selling the same product for $78.Suppose Jester wants to meet the competition's price and maintain the same amount of profit per unit.What would be the target cost?
A)$18
B)$38
C)$48
D)$58

Question

Quizplus · Accepted Answer

Jester Company's current profit per unit is ($90-$70)=$20. To maintain the same amount of profit per unit while selling at the competitor's price of $78, Jester needs to reduce its cost of production. The target cost can be calculated as:

Target cost = Selling price - Desired profit per unit
Target cost = $78 - $20 
Target cost = $58

Therefore, Jester needs to reduce its cost by $12 ($70-$58) to sell the product at the competitor's price and maintain the same profit per unit. The target cost will be $48 ($78-$30). So, option C) is the correct answer.

Jester Company Was Making a Product for $70 and Selling