Question

Sid’s Skins makes a variety of covers for electronic organizers and portable music players. The company’s designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $21. Sid’s desires an operating profit of 20 percent of costs. Required: What is the highest acceptable manufacturing cost for which Sid’s would be willing to produce the cover?

Answer 1

C = $17.50 (highest acceptable manufacturing cost to produce the cover)

Step-by-step explanation:

Data:

P = $21

Profit = 20% of costs = 0.2C

C = ?

Formula:

Profit = Price – Costs

Profit = P – C

0.2C = $21 – C

0.2C + C = $21

1.2C = $21

C = $21 / 1.2

C = $17.50 (highest acceptable manufacturing cost to produce the cover)