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# Target costing,elasticity of demand

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1. The management of Giammarino Corporation is considering introducing a new product--a compact barbecue. At a selling price of \$78 per unit, management projects sales of 10,000 units. Launching the barbecue as a new product would require an investment of \$100,000. The desired return on investment is 11%. The target cost per barbecue is closest to:
a. \$86.58
b. \$78.00
c. \$76.90
d. \$85.36

2. Hanisch Corporation would like to use target costing for a new product it is considering introducing. At a selling price of \$22 per unit, management projects sales of 50,000 units. The new product would require an investment of \$400,000. The desired return on investment is 14%. The target cost per unit is closest to:
a. \$22.00
b. \$23.80
c. \$20.88
d. \$25.08

3. A new product, an automated crepe maker, is being introduced at Knutt Corporation. At a selling price of \$59 per unit, management projects sales of 70,000 units. Launching the crepe maker as a new product would require an investment of \$500,000. The desired return on investment is 12%. The target cost per crepe maker is closest to:
a. \$59.00
b. \$66.08
c. \$58.14
d. \$65.12

4. Boe Company's management believes that every 3% decrease in the selling price of one of the company's products would lead to a 9% increase in the product's total unit sales. The product's variable cost is \$11.30 per unit. The product's price elasticity of demand as defined in the text is closest to:
a. &#8722;2.33
b. &#8722;1.07
c. &#8722;2.83
d. &#8722;2.95

5. Wenner Corporation would like to use target costing for a new product it is considering introducing. At a selling price of \$44 per unit, management projects sales of 10,000 units. The new product would require an investment of \$900,000. The desired return on investment is 10%. The desired profit according to the target costing calculations is:
a. \$90,000
b. \$350,000
c. \$44,000
d. \$440,000

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