Question

spectrum corp desires a 25% target gross profit after covering all product costs: considering the total product costs assigned to the products c and d, what would spectrum have to charge the customer to achieve that gross profit

Answer 1

Answer:

Note: "The full question is attached as picture below"

Required selling price for product = Total product cost / Product cost as a percentage of selling price

Note: When the gross profit rate is 25%, this means that Product cost as a percentage of selling price is 75%

Total cost assigned for product C = $1,396

Total cost assigned for product D = $3,158

What would Oak have to charge the customer to achieve that gross profit?

Charge to the customer for Product C:

= $1,396 / 0.75

= $1861.333333333333

= $1,861.33

Charge to the customer for Product D:

= $3,158 / 0.75

= $4210.666666666667

= $4,210.67