Question

Domingo Corporation makes a variety of headphones with logos. The company has discovered a new market for wireless headphones with logos. Market research indicates that these headphones would sell well in the market priced at $34.80 each. Domingo desires an operating profit of 20 percent of costs.
Required:

What is the highest acceptable manufacturing cost for which Domingo would be willing to produce the headphones?

Answer 1

Answer:

Manufacturing cost= $29 per unit

Explanation:

Giving the following information:

Market research indicates that these headphones would sell well in the market priced at $34.80 each. Domingo desires an operating profit of 20 percent of costs.

To calculate the cost we need to use the following formula:

manufacturing cost= selling price/ (1 + mark up) = 34.8/1.20= $29