Management of Niemczyk Corporation is considering a new product, an outdoor speaker that would have a selling price of $31 per unit and projected sales of 10,000 units. Launching the new product would require an investment of $700,000. The desired return on investment is 16%.Required:Determine the target cost per unit for the outdoor speaker.
What will be an ideal response?
| Projected sales (10,000 units × $31 per unit) | $ | 310,000 |
| Less desired profit (16% × $700,000) | 112,000 | |
| Target cost for 10,000 units | $ | 198,000 |
? | ||
| Target cost per unit ($198,000 ÷ 10,000 units) = $19.80 per unit | ||
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