Answered: What is the target cost if target…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells its top of the line "ECC" video player for a price of $430. It costs ECC $300 to make the player. ECC's main competitor is coming to market with a new video player that will sell for a price of $400. ECC feels that it must reduce its price to $400 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 19%. ECC currently sells 218,000 video players per year.

What is the target cost if target profit is 25% of sales and ECC must meet the competitive price of $400?

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