On Point, Inc., is interested in producing and selling a deluxe electric pencil

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 16 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener?(Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

target cost = 40/(1+ 16/100) = $34.48

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