The management of Jahns Corporation is considering introducing a new product-a compact barbecue. At a selling price of $59 per unit, management projects sales of 30,000 units. Launching the barbecue as a new product would require an investment of $500,000. The desired return on investment is 19%. The target cost per barbecue is closest to:
A) $66.44
B) $59.00
C) $70.21
D) $55.83

Question

Quizplus · Accepted Answer

The target cost is calculated by subtracting the desired return on investment from the total sales revenue, then dividing by the number of units. Total sales revenue is $59 * 30,000 = $1,770,000. Desired return is 19% of $500,000 = $95,000. Target cost = ($1,770,000 - $95,000) / 30,000 = $55.83.

The Management of Jahns Corporation Is Considering Introducing a New