Marcon Tech Corp

question 108

Essay

Marcon Tech Corp.,currently sells radios for $7,000.It has costs of $5,400.A competitor is bringing a new radio to market that will sell for $5,850.Management believes it must lower the price to $5,850 to compete in the market for radios.The marketing department believes that the new price will cause sales to increase by 10%,even with a new competitor in the market.Marcon's sales are currently 1,000 radios per year.
Required:
a.What is the target cost for the new target price if target operating income is 20% of sales?
b.What is the change in operating income if marketing department is correct and only the sales price is changed?
c.What is the target cost if the company wants to maintain its same income level,and marketing department is correct in its estimation?

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Definitions:

Negligence

A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances, resulting in harm to another party.

Malfeasance

Wrongdoing or misconduct, especially by a public official.

U.S. Supreme Court

The highest federal court in the United States, with ultimate appellate jurisdiction over all federal and state court cases that involve a point of federal law.

Congress

The legislative body of a country, often bicameral, responsible for making laws, deciding on the national budget, and overseeing the government.