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valentina_108 [34]
2 years ago
7

Block Island TV currently sells large televisions for $380. It has costs of $290. A competitor is bringing a new large televisio

n to market that will sell for $320. Management believes it must lower the price to $320 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 120,000 televisions per year. What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)
Business
1 answer:
Sergeu [11.5K]2 years ago
7 0

Answer:

$238.18

Explanation:

For calculation of target cost first we need to follow some steps which is shown below:-

Step 1

Operating income before = Sold television - Cost

= $380 - $290

= $90

Step 2

Total operating income = $90 × 120,000

= 10,800,000

Step 3

New sales in units = Target operating income ÷ Increase percentage

= 10,800,000 ÷ (120,000 × 110%)

= 10,800,000 ÷ 132,000

= $81.82

Finally

So, the Target cost = Lower price - New sales in units

= $320 - $81.82

= $238.18

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Answer:

Bonita’s break-even point in units for 2020 is 812.50 units.

Explanation:

Break-even point in units refers to the number of units of commodity that must sold by a company in order for its cost to be equal to revenue and therefore make no profit but also no loss. This can be determined for Bonita Industries as follows:

Selling price in 2020 = Selling price in 2019 * (100% - Percentage cut in selling price) = $1,000 * (100% - 40%) = $1,000 * 96% = $960

Variable expenses = $700

Fixed expenses = $780,000

Contribution per unit = Selling price in 2020 - Variable expenses = $960 - $700 = $260

Bonita’s break-even point in units for 2020 = Fixed expenses / Contribution per unit = $780,000 / $960 = 812.50 units

Therefore, Bonita’s break-even point in units for 2020 is 812.50 units.

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Voluntary restraint agreements is is also called voluntary export restraint. It is a restriction on the amount of goods and services that exporters are allowed to export to other countries. It is also referred to as export visa.

Tarrifs results in increase in price of goods and services while voluntary restraint agreement does not.

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