Husky Crafts currently sells motorboats for $60,000. It has costs of $46,500. A competitor is bringing a new motorboat to the market that will sell for $55,000. Management believes it must lower the price to $55,000 to compete in the market for motorboats. Marketing believes that the new price will cause sales to increase by 12.5%, even with a new competitor in the market. Husky Crafts' sales are currently 2,000 motorboats per year. Required (treat each question independently): What is the new target cost if target operating income is 25% of sales? (3) What is the change in operating income if marketing is correct and only the sales price is changed? (3) What is the target cost if the company wants to maintain its same income level, and marketing is correct? (3)

Husky Crafts currently sells motorboats for $60,000. It has costs of $46,500. A competitor is bringing a new motorboat to the market that will sell for $55,000. Management believes it must lower the price to $55,000 to compete in the market for motorboats. Marketing believes that the new price will cause sales to increase by 12.5%, even with a new competitor in the market. Husky Crafts' sales are currently 2,000 motorboats per year. Required (treat each question independently): What is the new target cost if target operating income is 25% of sales? (3) What is the change in operating income if marketing is correct and only the sales price is changed? (3) What is the target cost if the company wants to maintain its same income level, and marketing is correct? (3)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 28P: Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas...

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