Question

Pizza Pies Limited has the following value chain for its pizzas. Boxes are designed by Shala Designers Inc. and printed and delivered by Rodoes Printing Co. for $0.95 per box. The pizzas are made in the stores with fresh ingredients and baked in the ovens for a total cost of $3.80, including labor, ingredients, and overhead. The pizza delivery costs $1.35. Pizza Pies needs to reduce the price of its pizza to $6.50 to meet local demand. However, it desires a 10 percent markup for profit. a-1. What is the target cost?

Answer 1

Answer:

Target cost= $5.91

Explanation:

Giving the following information:

Pizza Pies needs to reduce the price of its pizza to $6.50 to meet local demand. However, it desires a 10 percent markup for profit.

We need to find the target cost using the following formula:

Target cost= selling price /  (1 + mark up percentage)

Target cost= 6.5/ (1.1)

Target cost= $5.91