Turnhilm,Inc

question 94

Essay

Turnhilm,Inc.is considering adding a small electric mower to its product line.Management believes that in order to be competitive,the mower cannot be priced above $139.The company requires a minimum return of 25% on its investments.Launching the new product would require an investment of $8,000,000.Sales are expected to be 40,000 units of the mower per year.
Required:
a)Compute the target cost of a mower.
b)Suppose the target cost calculated in part (b)above is not attainable using the company's current manufacturing facilities.Specifically,the average cost of producing the 40,000 units is $100 per unit.Besides abandoning the idea,what specific options are available to Turnhilm?
c)Suppose,using the company's current manufacturing facilities the average cost of producing the 40,000 units is only $80.What other specific options are available to Turnhilm?

---

Definitions:

Modifiers

Adjustments or changes made to something to alter its appearance or functionality.

CPT Procedure Code

A standardized numerical code assigned to every task and service a medical practitioner may provide to a patient including medical, surgical, and diagnostic services.

Insurance Carrier

A company that provides insurance policies to individuals or entities, covering health, life, and other forms of insurance.

Reimbursement

The process of repaying someone for expenses they have incurred, often used in healthcare and business contexts.