Question

Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer’s current full cost for the product is $44 per unit. 26. The target cost of the company’s product is_____
(A) $44
(B) $42
(C) $43
(D) $40

Answer 1

Answer:

Option (B) is correct.

Explanation:

Given that,

Selling price per unit = $48

Desired profit margin on sales = 12.5%

Flyer’s current full cost for the product = $44 per unit

Profit = Selling price × profit margin

         = $48 × 12.5%

         = $6

Target cost of unit = Selling price - Profit

                               = $48 - $6

                               = $42