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Accounting question ? its a word prb?


the company is anxious to enter the rapidly growing market for long life batteries that is based on lithium technology. management believes that to be fully competitive the price of the new battery that the company is developing cannot exceed 65 at the price management is confident that the company can sell 50,000 batteries per year. the batteries would require an investment of 2,500,000 and the desired ROI is 20%

what is the target cost of one battery ?

We want a return of $500,000 (20% X $2,500,000).

With 50,000 batteries per year, that would require a $10 profit per battery (500,000 / 50,000)

If we can sell them for $65... Our target cost would be $55 ($65 - $10)

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