Question

Ortega Company manufactures computer hard drives. The market for hard drives is very competitive. The current market price for a computer hard drive is $45. Ortega would like a profit of $10 per drive. What target cost Ortega should set to accomplish this objective

Answer 1

Ortega should set a target cost of $35

Step-by-step explanation:

Target cost is the competitive market price of a product minus the desired profit margin.

Competitive market price in this case is $45

Desired profit margin is $10

Target cost=competitive market price-desired profit amount

target cost=$45-$10=$35

Target cost for which the company must produce the hard drive in order to sell at $45 per drive and make a profit of $10 per drive is $35