Question

Yuhu manufactures cell phones and is developing a new model with a feature (aptly named Don't Drink and Dial) that prevents the phone from dialing an owner-defined list of phone numbers between the hours of midnight and 6:00 a.m. The new phone model has a target price of $360. Management requires a 10% profit on new product revenues.

Required: If required, round to the nearest dollar.

A. Calculate the amount of desired profit. $
B. Calculate the target cost.

Answer 1

Desired profit is $36

Target cost is $324

Step-by-step explanation:

the desired profit is 10% of the target sales price of $360 ,the desired profit computation is shown below:

Target price $360

Target profit ($360*10%) $36

Target cost($360-$36) $324

Target cost is the target competitive market price less desired target profit.

Targeting is used in such a way that the price charged is related to what the consumers are willing to pay not what the manufacturer thinks they should payment, hence it is a reflection of current market conditions and realities