Ask Question
22 February, 16:32

Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen printing that will be sold to grocery stores. If the current market price of cloth shopping bags is $2.25 and the company desires a net profit of 60 %, what is the target cost? The company estimates the full product cost of the cloth bags will be $ 0.80. Should the company manufacture the cloth bags? Why or why not?

+1
Answers (1)
  1. 22 February, 17:06
    0
    Instructions are below.

    Explanation:

    Giving the following information:

    The current market price of cloth shopping bags is $2.25

    Target profit = 60%

    First, we need to calculate the cost per unit to reach the target cost.

    Target cost = selling price * (1-targert profit)

    Target cost = 2.25*0.4 = $0.9

    Now, if $0.8 is the unitary total cost:

    Cost = (0.8*100) / 2.25 = 35.5%

    Profit = 100 - 35.5 = 64.5%

    The company should manufacture the product because it reaches the target profit per unit.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen printing that will be sold to grocery ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers