What is the target cost

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Question - Katy Co. is currently selling its kayak for $750, and the cost for producing its kayak is $550. Recently, a competitor is bringing a new kayak to market that will sell for $650. Management believes it must lower the price to competitor's price. Expected % Increases in sale with a new lowered price is 10.0%. Katy Co.'s current sales per year is 300 units.

Required -

1. What is the target cost for the new target price if the target operating income is 20% of sales?

2. What is the change in operating income if marketing department is correct and only the sales price is changed?

3. What is the target cost if the company wants to maintain its same income level, and marketing department is correct in its estimation?

Reference no: EM133184705

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