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Digital Camera Company operates in a highly competitive market. Digital Camera's most popular camera is the K8 that current sells at a price of
Digital Camera Company operates in a highly competitive market. Digital Camera's most popular camera is the K8 that current sells at a price of $120 per unit. Digital Camera expects to manufacture and sell 24,000 K8 cameras in the current year. a. If Digital Camera has an Operating Income target equal to 15% of Sales, what is the operating income target per unit for the K8 Camera at the current selling price? b. With the $120 sales price per unit and the 15% retum on sales target, what is Digital Camera's target cost per unit? c. Assume current cost per unit of the K8 camera is $107. The production manager thinks rework costs are too high and has initiated a quality improvement program to reduce rework costs. The program cost was $15,000 and resulted in a $72,000 reduction in rework costs for the 24,000 units produced and sold. Did Digital Camera meet the target cost per unit objective?
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