Marcon Tech Corp

question 39

Essay

Marcon Tech Corp., currently sells radios for $7,000. It has costs of $5,400. A competitor is bringing a new radio to market that will sell for $6,850. Management believes it must lower the price to $6,850 to compete in the market for radios. The marketing department believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Marcon's sales are currently 1,000 radios per year.
Required:
a. What is the target cost for the new target price if target operating income is 20% of sales?
b. What is the change in operating income if marketing department is correct and only the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and marketing department is correct in its estimation?

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Definitions:

Circadian Rhythm

Our biological clock; regular bodily rhythms (for example, of temperature and wakefulness) that occur on a 24-hour cycle.

REM Rebound

The tendency for REM sleep to increase following REM sleep deprivation.

Sequential Processing

A method of information processing where data is analyzed in a linear, step-by-step manner, often contrasted with parallel processing.

Cursive

A style of penmanship where characters are written in a flowing manner, typically for the purpose of making writing faster.