Answer the Following Question(s)using the Information Below

question 142

Multiple Choice

Answer the following question(s) using the information below.Frank's Computer Monitors Inc..currently sells 17" monitors for $270.It has costs of $210.A competitor is bringing a new 17" monitor to market that will sell for $225.Management believes it must lower the price to $225 to compete in the market for 17" monitors.Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market.Frank's sales are currently 10,000 monitors per year.
-What is the target cost if operating income is 25% of sales?

• A)$189.00
• B)$41.25
• C)$210.00
• D)$202.50
• E)$168.75

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered or changed, and should not affect future business decisions.

Differential Analysis

The process of comparing the differences in cost and revenue between different business decisions or scenarios to help in decision making.

Differential Analysis

The process of comparing the costs and benefits of different business decisions or alternatives.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit, representing the difference between the cost of the product and its selling price.