[N]

Selling Price = $10
Target Cost = $8 (10/1.25) for markup on cost
Current Cost = $8.40
Therefore cost gap = $0.40 ..Correct?

[N]

ok..i got 87.5% too using the formula: y=ax^b, although im not sure if its the right way to do it, plus its also time consuming:
the values which i used were as follows:

y= 7 (av. cumulative time)
a=8 (since this is the time req for the 1st one)
x=2 (for # of units)
calculations to get b:
y=a(x^b)
7=8(2^b)
7/8=2^b
b=log(7/8) / log2
b=-.19264…
since b=logLR/log2, therefore -.19264*log2=logLR
logLR=-0.0579….
so LR = 10^-0.0579 = 0.875
CORRECT?

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