The management of Nerby Corporation is considering introducing a new product--a compact lawn blower. At a selling price of $28 per unit, management projects sales of 40,000 units. The lawn blower would require an investment of $900,000. The desired return on investment is 20%.
-The target cost per lawn blower is closest to:
A)$28.20
B)$23.50
C)$33.60
D)$28.00

Question

Quizplus · Accepted Answer

Target cost = Anticipated selling price - Desired profit
= $28.00 per unit - ($180,000/40,000 units)
= $28.00 per unit - $4.50 per unit = $23.50 per unit

The Management of Nerby Corporation Is Considering Introducing a New