Johnson Lube is interested in producing and selling an industrial line of oil filters. Market research indicates that wholesale customers

are currently willing to pay $$8$ for similar filters, and that the company could sell $80,000$ units per year at that price.

Required: $$

a$.$ If Johnson Lube requires a $21$ percent return on sales, what is its target cost for the proposed industrial line of filters?

b$.$ Assume that market research reveals several of Johnson Lube's direct competitors are likely to lower the wholesale price of similar

filters to $$7$ per unit. To remain competitive, what will the company's target cost have to be to maintain a $21$ percent return on sales?

c$.$ At a wholesale price of $$7,$ Johnson Lube estimates that it can sell $83,800$ industrial filters per year instead of $80,000$ units.

Assuming its target costs are attainable, how much more or less profit per year will the company earn at the $$7$ wholesale price

compared to the initial wholesale price estimate of $$8?$