Light Fixtures Plus, a manufacturer of light fixtures would like to introduce a new semi-flush ceiling light

Management Nov 28, 2020

Light Fixtures Plus, a manufacturer of light fixtures would like to introduce a new semi-flush ceiling light. The fixture could not be priced at more than $250. The company requires a return on investment of 40% on all new products. The plan is to produce and sell 2,500 fixtures which would require a $400,000 investment. Instructions Calculate the target cost per light fixture

Expert Solution

Computation of Target Cost per Light Fixture:

Target Cost = Selling Price - Required Rate of Return per Unit

= $250 - $64

Target cost = $186

Workings:

Required rate of return per unit = $400,000*40%/2500 = $64

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