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On Point, Inc., is interested in producing and selling a deluxe electric pencil sharpener. Market research indicates that customers are willing to pay $40 for such a sharpener and that 20,000 units could be sold each year at this price. The cost to produce the sharpener is currently estimated to be $34.

a. If On Point requires a 16 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener?

b. If a competitor sells basically the same sharpener for $36, what would On Point's target cost be to maintain a 16 percent return on sales?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9977941

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