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10 September, 06:50

Cheng builds replica miniature cabinets. His costs for each cabinet are $28 each. A consultant tells Cheng that the average margin in his industry is 49%. Cheng currently sells the cabinets for $42, but thinks he should consider using the industry average margin as his target goal.

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  1. 10 September, 09:16
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    check the calculations below.

    You didn't post the complete information of the exercise, I searched the exercise online and tried to ask the most useful question.

    Explanation:

    a) current margin = Sale price - Cost

    = $42 - $28 = $14 per unit

    (b) Selling price if margin is 49%

    = Cost / (1-0.49)

    = 28 / 0.51

    = $55

    Profit = 55*49% = 227

    (c) Price to consumer = Selling price / (1-0.1)

    = 55 / 0.9

    = $61.1

    (d) Price to Consumer = Selling price from Chengg + Margin

    = 61 + 10 = $71
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