Question

Creative Chronometer, Inc. is planning to launch a new brand of watches for kids. Similar watches are available in the market for $56. In order to penetrate the market, the company plans to use target pricing and desires a 28% net profit markup on total cost. Calculate the target cost. (Round your answer to the nearest cent.) $71.68 $43.75 $40.32 $15.68

Answer 1

Answer: $43.75

Explanation:

Given the following :

Markup on total cost = 28%

Projected selling price (price of similar products) = $56

Target cost = projected selling price - desired profit

Desired profit = 28% of target cost

Assume target cost = a

a = 56 - 28%a

a = 56 - 0.28a

a + 0.28a = 56

1.28a = 56

a = 56 / 1.28

a = 43.75

Therefore, target cost 'a' equals $43.75