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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:
Compute the target cost of a mower.
Competitive Firm
A company that operates in a market with many competitors, facing a highly elastic demand curve for its product because many substitutes are available.
Supply Curve
A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply in the market.
Break-Even Point
The point at which total costs and total revenue are equal, resulting in no profit or loss.
Competitive Firm
is a business that operates in a market where it has to compete with other firms for customers and cannot influence market prices.
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