What is the target cost if operating income is 25% of sales?

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Multiple Choice

Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.



What is the target cost if operating income is 25% of sales?

a. $56.25

b. $67.50

c. $168.75

d. $202.50

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