Summit Products, Inc. is interested in producing and selling an improved widget. Market research indicates that customers would be willing to pay $98 for such a widget and that 58,000 units could be sold each year at this price. The current cost to produce the widget is estimated to be $58.

Summit has learned that a competitor plans to introduce a similar widget at a price of $88. In response, Summit may reduce its selling price to $88. If Summit requires a 25% return on sales, what is the target cost for the new widget?

a. $88.00

b. $66.00

c. $22.00

d. $24.50

Question

Mina Sparks

Business

5 March, 01:34

Summit Products, Inc. is interested in producing and selling an improved widget. Market research indicates that customers would be willing to pay $98 for such a widget and that 58,000 units could be sold each year at this price. The current cost to produce the widget is estimated to be $58.

Summit has learned that a competitor plans to introduce a similar widget at a price of $88. In response, Summit may reduce its selling price to $88. If Summit requires a 25% return on sales, what is the target cost for the new widget?

a. $88.00

b. $66.00

c. $22.00

d. $24.50

+3

Answers (1)

Know the Answer?

Belinda Nixon · Answer 1

b.$ 66

Explanation:

The question requires that Summit requires a return on sales of 25 %. To achieve that the cost of goods sold should be 75 %.

if the revised selling price is $ 88

the target cost price would be ($ 88 * 75 %) % 66