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Culver Cheese Company has developed a new cheese slicer called the Slim Slicer. The company plans...

Culver Cheese Company has developed a new cheese slicer called the Slim Slicer. The company plans to sell this slicer through its monthly catalogue. Given market research, Culver management believes the company can charge $30 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $35. By using cheaper materials and gaining efficiencies in mass production, management believes Culver can reduce the Slim Slicer’s cost substantially. The company wants to earn a return of 25% of the selling price.

(a)

Calculate the target cost for the Slim Slicer. (Round answer to 2 decimal places, e.g. 15.25.)

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Answer #1

Target cost

= Selling price - expected return

= 30 - (25%*30)

= 30 - 7.50

= 22.50

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