Question
Easy Solutions limited manufactures electronic calculators. One of its top-selling calculators has a price of $50. Recently, a competitor entered the market and started offering
Easy Solutions limited manufactures electronic calculators. One of its top-selling calculators has a price of $50. Recently, a competitor entered the market and started offering a similar calculator at a price that is 20% below the $50 price of Easy Solutions. Company policy requires Easy Solutions to have a profit margin equal to 30% on sales of each of its products.
What target cost would have to be set for the Easy Solutions calculator to remain competitive and still meet the target profit margin of the company?
Hugh Taylor, the newly appointed clerical assistant, thinks that the current cost of the calculator and its existing capabilities is not appropriate to achieve the target cost. Explain to Mr Taylor and the managementhow the company could apply the principles of product life cycle management and value engineering to achieve the target cost.
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