A new product, an automated crepe maker, is being introduced at Knutt Corporation. At a selling...

A new product, an automated crepe maker, is being introduced at Knutt Corporation. At a selling price of $40 per unit, management projects sales of 80,000 units. Launching the crepe maker as a new product would require an investment of $280,000. The desired return on investment is 11%. The target cost per crepe maker is closest to: (Round your answer to 2 decimal places.)

Multiple Choice

$47.42

$47.80

$39.62

$40.00

Solutions

Expert Solution

The correct answer is $ 39.62, calculated below:

---Note that desired cost = Sale price - expected net income

A	Investments	$ 280,000.00
B	Return on Investment	11%
C = A x B	Desired Net Income	$ 30,800.00
D	Units	80000
E = C/D	Net Income per unit	$ 0.39
F	Sale price per unit	$ 40.00
G = F - E	Target Cost per unit	$ 39.62
G = F - E	Correct answer	Option #3: $ 39.62

ekkarill92 answered 1 year ago

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