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3 October, 17:03

Sid's Skins makes a variety of covers for electronic organizers and portable music players. The company's designers have discovered a market for a new clear plastic covering with college logos for a popular music player. Market research indicates that a cover like this would sell well in the market priced at $24.50. Sid's desires an operating profit of 25 percent of costs. Required: What is the highest acceptable manufacturing cost for which Sid's would be willing to produce the cover? (Round your answer to 2 decimal places.)

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  1. 3 October, 19:38
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    The highest acceptable manufacturing cost for which Sid's would be willing to produce the cover is $19.60

    Explanation:

    The computation of the highest acceptable manufacturing cost is shown below:

    We know that the market priced at $24.50 and the operating profit is 25% of the cost, we assume the cost is 100 and the selling price equals to

    = Cost + operating profit

    = 100 + 25% * cost price

    = 125

    The market price is given for selling price but we have to compute for the cost price

    So, the calculation would be

    = $24.50 * 100 : 125

    = $19.60
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