The company president does not believe that the formula should be altered for fear it will tarnish the company's brand

1 answer:

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<span>The company president does not believe that the formula should be altered for fear it will tarnish the company's brand. </span>She prefers that the company spend more on marketing and increase the price. The company’s accountants believe that if marketing costs are increase by $400,000 then the company can achieve a selling price of $42 per bottle without losing any sales. At this price, will the company achieve its target operating income of 40% of revenue?

Total cost = $9,600,000

Add: Increase in marketing costs= 400 ,000

Total costs of redesigned table = $10 ,000,000

Revised cost per unit ($10,000,000 ÷ 400,000 units) = $25

Target cost per unit ($42 × 0.60) = $25.20

Yes, this proposal allows the company to meet its goal of target costs less than 60% of revenue and target operating income greater than 40% of revenue.

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