Question

8. Idea Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Idea Inc. can be sold only for $440 as opposed to the current market price charged of $540 per unit. Idea Inc. has decided to revise its sales price to $440. The annual sales target volume of the product after price revision is 260 units. Idea Inc. wants to earn 30% on its sa amount. 8.1 What are the target sales revenues? A) $148,720 (B) $114,400 440X 260 C) $80,080 D) $42,120 8.2 What is the target operating income? A) $82,320 B) $35,280 C) $34,320 D) $152,880 8.3 What is the total target cost? A) $140,000 B) $60,000 © $80,080 D) $40,000 8.4 What is the target cost per unit? A) $625.00 B) $336.00 $308.00 D) $145.00 es fishing poles that have a price of $125.00. It 1 Phu Quoc Inc. manufactures fishing poles that have a price of atroducing a new fishing pole that will sell for $1 of $90. A competitor is introducing a new fishing pole that must lower the price to $115.00 to compete in the Management believes it must lower the price to $115.00 ious fishing pole market. Marketing department believes that th

Answer 1

8.1 Option (B) is correct

Target sales revenue = Target sales units * Price per unit

Given: Target sales units = 260, Price per unit = $440

Putting the values, we get,

Target sales revenue = 260 * $440 = $114400

8.2 Option (C) is correct

Target operating income = 30% on target sales revenue

Given: Target sales revenue= $114400 (as calculated above in point (8.1)

Putting the values, we get,

Target operating income = 30% * $114400 = $34320

8.3 Option (C) is correct

Target cost = Target sales revenue - Target operating income

Given: Target sales revenue= $114400 (as calculated above in point (8.1), Target operating income = $34320 (as calculated above in point 8.2)

Putting the values, we get,

Target cost = $114400 - $34320 = $80080

8.4 Option (C) is correct

Target cost per unit = Target cost / Target sales units

Given: Target cost = $80080 (as calculated above in point (8.3), Target sales units = 260

Putting the values, we get,

Target cost per unit = $80080 / 260 = $308 per unit.