Sabrina Industries has conducted market research which indicates customers are interested in purchasing its new product.Sabrina requires a 40% gross margin on all new products.The production supervisor has been directed to produce this product at its target cost of $22.44 per unit.What is the price customers are willing to pay for this new product (if necessary, round your answer)?

Question

Quizplus · Accepted Answer

To calculate the price customers are willing to pay, we need to use the formula: 
Selling price = Cost / (1 - Gross margin %)
We know the target cost is $22.44 per unit and the gross margin required is 40%. So, substituting the values, we get:
Selling price = $22.44 / (1 - 0.40) = $37.40
Therefore, the correct choice is C.

Sabrina Industries Has Conducted Market Research Which Indicates Customers Are