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Firdavs [7]
3 years ago
11

Home Appliances Co. wants to introduce a new digital display, laser driven iron to the market. The estimated unit sales price is

$85. The required investment is $3,500,000. Unit sales are expected to be 300,000 and the minimum required rate of return on all investments is 15%. Compute the target cost per iron.
Business
1 answer:
malfutka [58]3 years ago
5 0

Answer:

<u>The target cost per iron= $83.25</u>

Explanation:

Profit Required = Required Investment * required rate of return

= $ 3,500,000*15%

= $ 525,000

Sales= 300000*85=$25,500,000.00

Less: profit required=$525,000.00

Cost= Sales- Profit

Cost=24,975,000.00

Per Unit Target Cost = Total Cost / Total Units

= $ 24,975,000/ 300,000

= $ 83.25

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