The market price for low-end laser printers is well established at $400 per unit
ID: 2476569 • Letter: T
Question
The market price for low-end laser printers is well established at $400 per unit. ABC Technologies is considering entering this market and has enough available space in its plant to accommodate a new production line. However, several pieces of new manufacturing equipment would be required which are estimated to cost $28,000,000. ABC Technologies requires a minimum ROI of 15% on any product line investment and estimate that it can capture 100,000 units of the low-end laser printer market at the prevailing market price.
(a.) Calculate the target cost per unit for ABC Technologies if it is to enter the low-end laser printer market while earning the minimum 15% ROI.
Explanation / Answer
Minimum Income required = 28,000,000 *.15 = 4,200,000
Income per unit required = 4,200,000 / 100,000 = $ 42 per unit
Target cost per unit = 400 -42 =$ 358 per unit
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