Question

Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its catalog, which it issues monthly. Given market research, Mesa believes that it can charge $19 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $29. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce Slim Slicer's cost substantially. Mesa wishes to earn a return of 41% of the selling price. Compute the target cost for the Slim Slicer.

Answer 1

Answer:

$ 13.21

Explanation:

Data provided:

Selling cost of cheese slicer = $ 19

Cost of the prototype = $ 29

Expected return = 41%

i.e 41% of the selling cost = 0.41 × $ 19 = $ 7.79

Now,

the target cost is calculated as :

Target cost = Selling Price - Expected Return from the Stock

on substituting the values, we get

Target cost = $ 21 - $ 7.79 = $ 13.21