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.)

Question

Business

Erin Villanueva

8 February, 15:37

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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Answers (1)

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Alfredo Vang · Answer 1

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