Question
4 Eastern Auto Supply, Inc., produces and distributes auto supplies. The company is anxious to enter the rapidly growing market for long-life batteries that is
4 Eastern Auto Supply, Inc., produces and distributes auto supplies. The company is anxious to enter the rapidly growing market for long-life batteries that is based on lithium technology. Management believes that to be fully competitive, the price of the new battery that the company is developing cannot exceed $65. At this price, management is confident that the company can sell 50,000 batteries per year. The batteries would require an investment of $2,500,000, and the desired ROI is 20%. Required: Compute the target cost of one battery. Sales $3,250,000 Less desired profit 500,000 Target cost for 50,000 batteries $2,750,000 Target cost per battery ?
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