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27 January, 16:49

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer's management desires a 12.5% profit margin on sales. Its current full cost for the product is $44 per unit. What is the target cost of the company's product

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  1. 27 January, 20:15
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    Target cost = $42.67

    Explanation:

    Giving the following information:

    Top-selling price = $48

    Desired profit margin = 12.5% profit margin on sales.

    Its current full cost for the product is $44 per unit.

    The company can't sell the product over $48 per unit. To obtain the profit margin required it must decrease the full cost per unit.

    Target cost = 48/1.125 = $42.67
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