A Custom Kitchen Cabinet Storeowner Wishes to Use Target Return-On-Sales

question 166

Multiple Choice

A custom kitchen cabinet storeowner wishes to use target return-on-sales pricing to establish a price for a typical section of cabinets.Assume variable cost is $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent of sales on an annual volume of 400 cabinets.What price should be charged for a typical cabinet section?

• A)$372.00
• B)$311.00
• C)$445.50
• D)$395.75
• E)$387.50

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Definitions:

Effective-Interest Method

A way of calculating the amortized cost of a bond and the amount of interest expense over its relevant period.

Interest Expense

The cost incurred by an entity for borrowed funds, often reflected in financial statements.

Market Rate

The market rate refers to the current price or interest rate of a commodity, security, labor, or currency in the marketplace.

Straight-Line Amortization

A method of reducing the value of an intangible asset over a fixed period of time evenly.