A new product an automated crepe maker is being introduced a

A new product, an automated crepe maker, is being introduced at Knutt Corporation. At a selling price of $45 per unit, management projects sales of 85,000 units. Launching the crepe maker as a new product would require an investment of $330,000. The desired return on investment is 16%. The target cost per crepe maker is closest to: (Round your answer to 2 decimal places.) Multiple Choice $44.38 $52.42 $45.00 $52.80

Solution

Solution:

Projected sales = Sales units* selling price = 85000 *$45 = $3,825,000

Desired Return on Investment = Investment *desired rate of return = $330,000* 16% = $52,800

Total target cost = Projected sales - Desired return = $3825000 - $52800 = $3,772,200

Target cost per crepe maker = Total target cost / sale units = $3772200 / 85000 = $44.38

Hence, First option is correct.