Question

Hulston Appliances Co. wants to introduce a new digital display, laser driven iron to the market. The estimated unit sales price is $44.00. The required investment is $88,000. Unit sales are expected to be 8,800 and the minimum required rate of return on all investments is 10.00%. Compute the target cost per iron.

Answer 1

Target cost per unit = $43 per unit

Step-by-step explanation:

Target cost is the cost at which a product must be produced and sold to achieve a desired profit margin

Target cost =(Sales revenue - (ROI × capital) )/ No of units

Target cost =( (44 × 8,800) - (10%× $88,000 ) )/ 8,800 guns

Target cost per unit = (387200 - 8800 ) / 8,800 units= $43 per unit

Target cost per unit = $43 per unit