The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?

The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?

The owner of a store that sells custom kitchen cabinets wishes to use a target return-on-sales pricing approach to establish a price for a typical section of cabinets. Assume that variable costs total $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent return on sales at an annual volume of 400 cabinets. What price should be charged for a typical cabinet section?




a.

$263.50

b.

$311.00

c.

$387.50

d.

$445.50

e.

$775.00



Answer: $387.50


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