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Q1) We-Catch Corporation produces fishing poles which have a price of $21.00. It has costs of $16.32. A competitor is introducing latest fishing pole which will sell for $18.00. Management believes it should lower price to $18.00 to compete in highly cost-conscious fishing pole market. Marketing thinks that new price will sustain current sales level. We-Catch Corporation's sales are presently 200,000 poles per year.

a. Compute target cost for new price if target operating income is 20% of sales?

b. Determine the change in operating income for year if $18.00 is new price and costs remain the same?

c. Compute target cost per unit if selling price is decreased to $18.00 and company wishes to sustain its same income level?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918073

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