Flyer Company sells a product in a competitive marketplace. Market analysis indicates that their product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Their current full cost per unit for the product is $44 per unit. What is the target cost of the company's product?
A) $44
B) $42
C) $43
D) $40

Question

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