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Eckert Company is involved in producing and selling high-end golf equipment. The company has recently been...

Eckert Company is involved in producing and selling high-end golf equipment. The company has recently been involved in developing various types of laser guns to measure yardages on the golf course. One small laser gun, called LittleLaser, appears to have a very large potential market. Because of competition, Eckert does not believe that it can charge more than $84 for LittleLaser. At this price, Eckert believes it can sell 119,000 of these laser guns. Eckert will require an investment of $14,875,000 to manufacture, and the company wants an ROI of 16%.

Determine the target cost for one LittleLaser.

Target cost $
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Answer #1

Return on Investment = Investment * ROI (in %)

= 14875000*16/100

=$2380000

ROI per unit = 2380000 / 119000

= $20

Target Cost = Market price - ROI per unit

= $84 - $20

= $64

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