Creative Chronometer,Inc.is planning to launch a new brand of watches for kids.Similar watches are available in the market for $56.In order to penetrate the market,the company plans to use target pricing and desires a 28% net profit markup on total cost.Calculate the target cost.(Round your answer to the nearest cent.)
A)$71.68
B)$15.68
C)$43.75
D)$40.32

Question

Quizplus · Accepted Answer

First, we need to calculate the target price:
Target Price = Market Price (similar watches available in the market) x (100% + Net Profit Markup)
Target Price = $56 x (100% + 28%)
Target Price = $56 x 1.28
Target Price = $71.68
Next, we can calculate the target cost:
Target Cost = Target Price / (100% + Markup Percentage)
Target Cost = $71.68 / (100% + 28%)
Target Cost = $71.68 / 1.28
Target Cost = $56
Therefore, the target cost for the new brand of watches is $43.75, which is option C.