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PART 2 Husky Crafts currently sells motorboats for $60,000. It has costs of...

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Accounting

PART 2
Husky Crafts currently sells motorboats for $60,000. It has costs of $46,500. A competitor is bringing a new motorboat to the market that will sell for $55,000. Management believes it must lower the price to $55,000 to compete in the market for motorboats. Marketing believes that the new price will cause sales to increase by 12.5%, even with a new competitor in the market. Husky Crafts' sales are currently 2,000 motorboats per year.
Required (treat each question independently):
a. What is the new target cost if target operating income is 25% of sales? (3)
b. What is the change in operating income if marketing is correct and only the sales price is changed? (3)
c. What is the target cost if the company wants to maintain its same income level, and marketing is correct? (3)

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