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Dot Company sells a product for $225 per unit. Its market share is 20 percent. The...

Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must be maintained. What is the target cost per unit?

a.$189

b.$159

c.$195

d.$225

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Answer #1

Answer; Option (b) is correct

Explanation:

Target cost = Revised selling price per unit - Target profit

                = ($195 - $36) per unit

               = $159 per unit

Therefore, target cost is equal to $159 per unit, in order to earn a profit of $36 per unit.

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