Eckert Company is involved in producing and selling high-end golf equipment. The

Question

Eckert Company is involved in producing and selling high-end golf equipment. The company has recently been involved in developing various types of laser guns to measure yardages on the golf course. One small laser gun, called LittleLaser, appears to have a very large potential market. Because of competition, Eckert does not believe that it can charge more than $94 for LittleLaser. At this price, Eckert believes it can sell 112,000 of these laser guns. Eckert will require an investment of $8,400,000 to manufacture, and the company wants an ROI of 24%.

Determine the target cost for one LittleLaser.

Explanation / Answer

ROI = 24% Investments = $8,400,0000 Total Profit = $8,400,000 X 24% = $2,016,000 Profit per LittleLaser = $2,016,000 / 112000 Nos = $18 per unit Target Cost = $94 (Total Price) - $18 (Target Profit) Target Cost = $76

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