Question

Well Water Inc. wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2.00 per 12 oz. bottle. The following data has been collected:

Annual sales......................................................50,000 bottles
Projected selling and administrative costs.....$8,000
Desired profit.....................................................$80,000

The target cost per bottle is:__________

Answer 1

The answer is "0.4".

Step-by-step explanation:

`\\\to \text{Total Cost of Goods Sold = Sales revenue - Desired profit}`

`= (2* 50,000) - 80,000\\\\= 1,00,000 - 80,000\\\\= 20,000`

Calculating the target cost per bottle:

`= \frac{\text{Total cost of goods sold}}{ \text{units sold}}\\\\= (20,000)/(50,000)\\\\= (2)/(5)\\\\= 0.4`