Managerial 12.4 (PART 2)
23) What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)? A) $225.00 B) $227.27 C) $246.68 D) $280.00
B
26) What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)? A) $168.75 B) $170.46 C) $185.00 D) $210.00
B
27) When the firm uses the target-costing approach to pricing, the target cost per unit is the difference between the per unit target price and the per unit target: A) contribution margin B) operating income C) production costs D) gross margin
B
28) Action Toys has a new video game cassette for the upcoming holiday season. It is trying to determine the target cost for the game if the selling price per unit will be set at $60, the going price for video games, and the firm wants to earn a target operating income of 12% of sales. What will be the target cost per unit for the new game? A) $48.00 B) $52.80 C) $53.57 D) $67.20
B
Block Island TV currently sells large televisions for $360. It has costs of $280. A competitor is bringing a new large television to market that will sell for $300. Management believes it must lower the price to $300 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 100,000 televisions per year. 21) What is the target cost if target operating income is 25% of sales? A) $75 B) $90 C) $225 D) $270
C
Frank's Computer Monitors, Inc., currently sells 17" monitors for $270. It has costs of $210. A competitor is bringing a new 17" monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17" monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank's sales are currently 10,000 monitors per year. 24) What is the target cost if operating income is 25% of sales? A) $56.25 B) $67.50 C) $168.75 D) $202.50
C
22) What is the change in operating income if marketing is correct and only the sales price is changed? A) $2,200,000 B) $600,000 C) $(2,200,000) D) $(5,800,000)
D
25) What is the change in operating income if marketing is correct and only the sales price is changed? A) $165,000 B) $45,000 C) $(165,000) D) $(435,000)
D
