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22 June, 13:02

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

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  1. 22 June, 15:08
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    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
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