Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Innerspace, Inc. produces drones. The market research department at Innerspace, Inc., gets an idea to market the drone technology, which is a small computer, to

image text in transcribedimage text in transcribed

Innerspace, Inc. produces drones. The market research department at Innerspace, Inc., gets an idea to market the drone technology, which is a small computer, to the auto industry for use in self-driving cars. Because of the riskiness of the venture, Innerspace, Inc., requires an operating margin 40 percent (operating margin equals revenues minus manufacturing costs). The competitors of Innerspace, Inc., market a similar small computer for a price of $450. The manufacturing department at Innerspace, Inc., estimates for following manufacturing costs for the small computer to be installed in self-driving cars. Required: a. Suppose Innerspace uses cost-plus pricing, setting the price to manufacturing costs plus 40 percent of manufacturing costs. What price should it charge for the computer? b. Suppose Innerspace uses target costing. What is the highest acceptable manufacturing cost for which Innerspace would be willing produce to the small computer? Complete this question by entering your answers in the tabs below. Suppose Innerspace uses cost-plus pricing, setting the price to manufacturing costs plus 40 percent of manufacturing costs. What price should it charge for the computer? (Round your answer to 2 decimal places.) Complete this question by entering your answers in the tabs below. Suppose Innerspace uses target costing. What is the highest acceptable manufacturing cost for which Innerspace would be willing produce to the small computer? (Round your answer to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Japanese Management Accounting A World Class Approach To Profit Management

Authors: Michiharu Sakurai, Yasuhiro Monden

1st Edition

091529950X, 978-0915299508

More Books

Students also viewed these Accounting questions