A custom tailor wishes to use target profit pricing to establish a price for a custom designed business suit.Assume variable cost is $200 per suit, fixed cost is $44,000, and a target profit of $50,000 on a volume of 50 suits is desired.What price should be charged for a typical custom suit?
A)$900.00
B)$1,040.00
C)$1,800.00
D)$2,080.00
E)$4,680.00

Question

Quizplus · Accepted Answer

To find the price per suit, calculate the total cost (fixed cost + variable cost for 50 suits) and add the target profit, then divide by the number of suits. Total cost = $44,000 + ($200 * 50) = $54,000. Total revenue needed = $54,000 + $50,000 = $104,000. Price per suit = $104,000 / 50 = $2,080.

A Custom Tailor Wishes to Use Target Profit Pricing to Establish