Case #1 Lighting World Inc. is a distributor of light fixtures. The company purchases each light...
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Case #1 Lighting World Inc. is a distributor of light fixtures. The company purchases each light fixture for $200 and sells them to retailers for $260. Recently, a competitor has moved into the marketplace currently served by Lighting World that sells light fixtures for $230. Management at Lighting World believes it must lower their price to $230 to remain competitive in the market. After conducted market analysis, the Marketing Department believes that the new selling price will cause Lighting World's sales to increase by 10%, even with the new competitor in the market. Currently, sales are 150,000 light fixtures per year. Required (A) Using the new selling price, if the target operating income is 25% of sales, what is the target cost? (B) If Lighting World reduces its selling price, what will be the change in operating income? (C) Compute the Operating Income the company would earn before making any changes. If the company wants to continue earning that same dollar amount of income after reducing its selling price, what must the new target cost be per unit? Case #1 Lighting World Inc. is a distributor of light fixtures. The company purchases each light fixture for $200 and sells them to retailers for $260. Recently, a competitor has moved into the marketplace currently served by Lighting World that sells light fixtures for $230. Management at Lighting World believes it must lower their price to $230 to remain competitive in the market. After conducted market analysis, the Marketing Department believes that the new selling price will cause Lighting World's sales to increase by 10%, even with the new competitor in the market. Currently, sales are 150,000 light fixtures per year. Required (A) Using the new selling price, if the target operating income is 25% of sales, what is the target cost? (B) If Lighting World reduces its selling price, what will be the change in operating income? (C) Compute the Operating Income the company would earn before making any changes. If the company wants to continue earning that same dollar amount of income after reducing its selling price, what must the new target cost be per unit?
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Answer rating: 100% (QA)
A Particulars New Selling Price Target Operating income Target Cost B AmountRemarks 230 57... View the full answer
Related Book For
Management and Cost Accounting
ISBN: 978-1292063461
6th edition
Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Posted Date:
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