The management of Kozloff Corporation is considering introducing a new product--a compact barbecue.At a selling price of $74 per unit,management projects sales of 80,000 units.Launching the barbecue as a new product would require an investment of $800,000.The desired return on investment is 14%.The target cost per barbecue is closest to:
A)$72.60
B)$82.76
C)$84.36
D)$74.00

Question

Quizplus · Accepted Answer

The target cost per unit is calculated by subtracting the desired return on investment per unit from the selling price. The desired return is 14% of the $800,000 investment, which is $112,000. Dividing this by the projected sales of 80,000 units gives a return of $1.40 per unit. Therefore, the target cost per unit is $74 - $1.40 = $72.60.

The Management of Kozloff Corporation Is Considering Introducing a New