Based on potential sales of 500 units per year, a new product
has estimated traceable costs of $990,000. What is the target
price to obtain a 15% profit margin on sales?

(a) The target price is to be set at a budgeted ratio of
operating income to revenue, or a profit margin on sales of 15%.
This problem may be solved using the following equation:
Let x = Target price
Revenue – Cost = Profit
500x – $990,000 = .15(500x)
.85(500x) = $990,000
425x = $990,000
x = $2,329