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

ACCOUNTING

Multiple Choice

Sheltar’s TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Sheltar’s sales are currently 100,000 televisions per year



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

a. $37.50

b. $45.00

c. $112.50

d. $135.00

Click here for the SOLUTION