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Target costing,elasticity of demand

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. −2.33
b. −1.07
c. −2.83
d. −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

Solution Summary

The answer contains the computation of target cost,price elasticity of demand,desired profit

$2.19