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.
-The target cost of the company's product is
A)$44
B)$42
C)$43
D)$40

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.​
-The target cost of the company's product is
A)$44
B)$42
C)$43
D)$40

Quizplus · Accepted Answer

The target cost is calculated by subtracting the desired profit margin from the selling price. Desired profit margin is 12.5% of $48, which is $6. Therefore, the target cost is $48 - $6 = $42.

Flyer Company Sells a Product in a Competitive Marketplace