Block Island TV Currently Sells Large Televisions for $380

question 191

Multiple Choice

Block Island TV currently sells large televisions for $380. It has costs of $290. A competitor is bringing a new large television to market that will sell for $310. Management believes it must lower the price to $310 to compete in the market for large televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Block Island TV sales are currently 110,000 televisions per year.
What is the target cost per unit if target operating income is 35% of sales?

• A) $108.50
• B) $133.00
• C) $201.50
• D) $247.00

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Definitions:

In-Kind Benefit

A benefit given in the form of goods or services.

Food Stamps

Government-issued vouchers that allow individuals to purchase groceries, aimed at assisting those in low-income households.

Median Household Income

The income amount that divides households into two equal groups, half having income above that amount and half having income below that amount.

Mean Household Income

The average income across all households.