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.
-If the company cannot cut costs any lower than they already are, the profit margin on sales to meet the market selling price would be
A)9.3%
B)7.3%
C)10.3%
D)8.3%

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.​
-If the company cannot cut costs any lower than they already are, the profit margin on sales to meet the market selling price would be
A)9.3%
B)7.3%
C)10.3%
D)8.3%

Quizplus · Accepted Answer

The profit margin on sales is calculated as (Selling Price - Cost) / Selling Price. Given the selling price is $48 and the cost is $44, the profit per unit is $4. Therefore, the profit margin is ($4 / $48) * 100% = 8.3%.

Flyer Company Sells a Product in a Competitive Marketplace