2. Premo Pens, Inc., is in the process of developing a new pen to replace its...

 

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2. Premo Pens, Inc., is in the process of developing a new pen to replace its existing top-of-the-line Executive Model. Market research has identified the critical features the pen must have, and it is estimated that customers would be will- ing to pay $30 for a pen with these features. Premo's produc- tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu- tive Model sells for $24 and has a total production cost of $20. A competitor sells a pen similar to the proposed model. but without Premo's patented easy retract feature, for $28. It is estimated to cost the competitor $25 to produce. If Premo seeks to earn a 20 percent return on sales on the new model, which of the following represents the target cost for the new pen? a. $26.00. b. $22.40. c. $24.00. d. $19.80. 2. Premo Pens, Inc., is in the process of developing a new pen to replace its existing top-of-the-line Executive Model. Market research has identified the critical features the pen must have, and it is estimated that customers would be will- ing to pay $30 for a pen with these features. Premo's produc- tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu- tive Model sells for $24 and has a total production cost of $20. A competitor sells a pen similar to the proposed model. but without Premo's patented easy retract feature, for $28. It is estimated to cost the competitor $25 to produce. If Premo seeks to earn a 20 percent return on sales on the new model, which of the following represents the target cost for the new pen? a. $26.00. b. $22.40. c. $24.00. d. $19.80.

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