Question

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer's management desires a 12.5% profit margin on sales. Its current full cost for the product is $44 per unit. What is the target cost of the company's product

Answer 1

Answer:

Target cost= $42.67

Explanation:

Giving the following information:

Top-selling price= $48

Desired profit margin= 12.5% profit margin on sales.

Its current full cost for the product is $44 per unit.

The company can't sell the product over $48 per unit. To obtain the profit margin required it must decrease the full cost per unit.

Target cost= 48/1.125= $42.67