Question

Gibson Instruments is planning to produce and market a new line of guitars. The current market price for similar guitars is $1,200, and Gibson would like to make a 30% profit on cost. What should Gibson’s target cost be?

Answer 1

We are given the current market price that is $1,200 and we are asked in the problem to compute the target cost if one wishes to gain a 30% profit. In this case, we have to minimize the cost to achieve the profit desired. Then,

1.3 y = 1200
where y is the target cost
y = $923.08