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Crane Company wants to produce and sell a new flavored water. In order to penetrate the...

Crane Company wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2 per 12 oz. bottle. The following data has been collected:

Annual sales 48000 bottles
Projected selling and administrative costs $8000
Desired profit $60000


The target cost per bottle is

$0.17.

$0.58.

$0.25.

$0.75.

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Answer #1

Sales - Total cost = Profit

Sales - (Product cost + Selling and administrative cost) = Desired profit

(48,000 * $2) - [(48,000 * Target cost) + $8,000 = $60,000

$96,000 - (48,000 * Target cost) - $8,000 = $60,000

Target cost = $0.58

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