Question

Jones Company manufactures a chair that has a current market price of $120. Jones Company has decided to use the target pricing approach. Company stockholders expect a 15% return (ROI) and the company’s average assets are $550,000. The company expects to sell 1,000 chairs. What is the amount of total desired profit for Jones Company stockholders?

Answer 1

Answer:

$82,500

Explanation:

Data provided in the question:

Market price of the chair manufactured = $120

Expected ROI by the stockholders = 15% = 0.15

Company’s average assets = $550,000

Expected sales = 1,000 chairs

Now,

the amount of total desired profit for Jones Company stockholders will be

= Expected ROI by the stockholders × Company’s average assets

= 15% × $550,000

= 0.15 × $550,000

= $82,500