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What is the target cost if target operating profit is

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Question: Safety Avionics currently sells radios for $1800 each. Each radio costs $1400 to make. A competitor is introducing a new radio that will sell for $1600. Mt Safety believes it must lower the price to $1600 to compete in the market for radios. However, its Marketing Department believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Mt Safety's sales are currently 1000 radios per year.

Required:

a. What is the target cost if target operating profit is 25% of sales?

b. What is the change in operating profit if marketing is correct and only the sales price is changed? 2 marks What is the target cost if the company wants to maintain its same profit level, and marketing is correct?

Reference no: EM133560980

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