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24 February, 14:05

Bouchard Company manufactures a product that currently has a full cost of $ 200. Its target operating income per unit is $ 40 and management's budgets assume that same target operating income per unit for the foreseeable future. To stay competitive, Bouchard management believes it must cut its price by 25 %. What will be its new target price?

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  1. 24 February, 14:11
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    New target price is $ 180.

    Explanation:

    This question requires us to calculate the new target price. The detail calculation is given below.

    Current price = Full cost + target income

    Current price = $ 200 + $ 40

    Current price = $ 240-A

    New Price = A * (75%)

    New price = $ 180

    (new price is 75% of current price)
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