Question

Sunland Company is involved in producing and selling high-end golf equipment. The company has recently been involved in developing various types of laser guns to measure yardages on the golf course. One small laser gun, called LittleLaser, appears to have a very large potential market. Because of competition, Sunland does not believe that it can charge more than $91 for LittleLaser. At this price, Sunland believes it can sell 101,000 of these laser guns. Sunland will require an investment of $6,868,000 to manufacture, and the company wants an ROI of 25%. Determine the target cost for one LittleLaser. Target cost $

Answer 1

$74

Step-by-step explanation:

A return on investment of 25% of $6,868,000

=25/100 * 6,868,000

= +$1,717,000 on investment

Return on investment per unit = $1,717,000/101,000=$17 per unit

The Target Cost value= Market Price- desired ROI (profit)= $91- $17= $74

Therefore, the target cost per unit of LittleLaser which Sunland should incur should be $74.