Question

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 20 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener

Answer 1

Answer: $32

Explanation:

The target cost would be such that 20% of the $40 that people are willing to pay would be profit.

The target profit is therefore:

= 20% * 40

= $8

Target cost is therefore:

= Amount customers would pay - Target profit

= 40 - 8

= $32

Answer 2

Answer:

The answer is $32 for sure :)