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Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells...

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 $290. It costs ECC $230 to make the player. ECC's main competitor is coming to market with a new video player that will sell for a price of $260. ECC feels that it must reduce its price to $260 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 204,000 video players per year.

What is the target cost if target profit is 24% of sales and ECC must meet the competitive price of $260?

Multiple Choice

  • $190.10.

  • $197.60.

  • $205.85.

  • $211.60.

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Answer #1
Target price 260.00
Less: Target profit 62.40 =260*24%
Target cost 197.60
Option B $197.60 is correct
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