Question4(c) [1 mark] Kaput Drones manufactures recreational flying drones. They are currently developing their latest model, Ibis X, which the company expects to sell at the market price of $1,500. Kaput Drones’ products are required to generate a profit margin of 20% of sales. The current cost of Ibis X is $1,400. What is Ibis X’s cost reduction objective? A. $100 B. $150 C. $180 D. $200 E. $300 ResetMaximum marks: 1 Flag question undefined单项选择题
A
A. $100
B
B. $150
C
C. $180
D
D. $200
E
E. $300

Question

Question4(c) [1 mark] Kaput Drones manufactures recreational flying drones. They are currently developing their latest model, Ibis X, which the company expects to sell at the market price of $1,500. Kaput Drones’ products are required to generate a profit margin of 20% of sales. The current cost of Ibis X is $1,400. What is Ibis X’s cost reduction objective? A. $100 B. $150 C. $180 D. $200 E. $300 ResetMaximum marks: 1 Flag question undefined单项选择题

A

A. $100

B

B. $150

C

C. $180

D

D. $200

E

E. $300

BlackTom AI · Accepted Answer

Begin by identifying the required profit and its relation to the sales price. The company wants a profit margin of 20% of sales, and the planned selling price is $1,500. Calculating profit: 0.20 × 1,500 = $300. Next, determine the target cost that would yield this profit at the given price: Target cost = Selling price − Profit = 1,500 − 300 = $1,200.
Now compare the current cost to the target cost: Current cost is $1,400, while the target cost is $1,200. The needed cost reduction is 1,400 − 1,200 = $200.
Option A: $100 — This underestimates the required reduction and would not achieve the 20% profit target.
Option B: $150 — This is still below the necessary $200 reduction and would leave cost too high.
Option C: $180 — This is closer but insufficient, since a $1,200 target cost is required for the stated margin.
Option D: $200 — This matches the calculated reduction needed to reach the target cost of $1,200, enabling a $300 profit on $1,500 sales.
Option E: $300 — This exceeds the needed reduction and would imply a target cost well below what is required to maintain the requested margin, potentially harming feasibility.
In summary, the cost reduction objective to achieve the 20% profit margin at a $1,500 price is $200, corresponding to option D.

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