Todd Ltd Sells a Product for £400 Per Unit

question 62

Essay

Todd Ltd. sells a product for £400 per unit. Its market share is 22 percent of the units sold. The marketing manager feels that the market share can be increased to 28 percent of the units sold with a reduction in price to £340. The product is currently earning a profit of £64 per unit. The president of Todd Ltd. feels that his company needs to maintain the same profit level per unit. The market share consists of £4,000,000 (10,000 units).
Required:
a.
How many units does Todd Ltd. currently sell of the product?
b.
What is the target price per unit?
c.
What is the original cost per unit?
d.
What is the target cost per unit?

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Definitions:

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders but not retired, held as an asset on the balance sheet.

Premium

The amount by which the price of a financial instrument or asset exceeds its par or face value; also refers to the cost paid for an insurance policy.

Owners' Equity

The residual interest in the assets of a business after deducting liabilities, representing the ownership stake.

Noncurrent Liabilities

Long-term financial obligations listed on a company's balance sheet that are not due for settlement within one year.