Question

Eckert 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, Eckert does not believe that it can charge more than $87 for LittleLaser. At this price, Eckert believes it can sell 103,000 of these laser guns. Eckert will require an investment of $7,828,000 to manufacture, and the company wants an ROI of 25%.. Determine the target cost for one LittleLaser

Answer 1

Answer:

The target cost for one LittleLaser is $68

Explanation:

For computing the target cost, first we have to compute the profit per laser guns which is shown below:

Profit per gun = (Investment × ROI) ÷ (Number of laser guns sold)

                       = ($7,828,000 × 25%) ÷ (103,000 laser guns)

                       = ($1,957,000) ÷ (103,000 laser guns)

                       = $19

And, the cost price charged is $87

So, the target cost for one Little laser would be

= $87 - $19

= $68