Bakersfield Manufacturing produces agricultural tools including a hand tiller. Their current full- product cost for a hand tiller is $20. Bakersfield wishes to make a 15% profit on the selling price. Bakersfield uses a target pricing strategy. The current competitive market price for this product is $22. What does Bakersfield have to do to achieve their profit objective?

Question

Quizplus · Accepted Answer

To achieve a 15% profit on the selling price of $22, Bakersfield needs to sell the product for $22 - $20 = $2 profit. However, 15% of $22 is $3.30, so they need to reduce the cost by $1.30 to achieve this profit margin.

Bakersfield Manufacturing Produces Agricultural Tools Including a Hand Tiller