Question

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is

Answer 1

Answer:

$170

Explanation:

If the goal is to achieve a 15% return on sales, Blanchard Inc., can afford to spend at most 85% of the estimated price ($200) on the production of the new product. Therefore, the target cost is:

$C = 0.85*\ 200\\C=\ 170$

The target cost is $170.