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So the question is Original forecasts
The sales director believes that the highest possible sales price for the company to achieve its target of 15,000 sales units
250.
The finance director
wishes the tent to make a 30% profit margin initially.
The following costs have been forecast for the new
Production costs per unit
Direct materials and components 54
Direct labour 42
Machining costs 32
Quality control costs 12
Total non-production costs
Design 200
Marketing 320
Sales and distribution 215Based on the original forecasts, what is the predicted cost gap for the new tent (to the nearest whole
I calculated the answer to be 735/15000= 140.049
Desired profit margin 250*30%= 75
250-75= 175So cost gap is 175-140.049= 34.951
Is this correct?its a mock question, the answer mentioned is 34.951. but i don’t understand the logic behind it. the sales director believes highest possible sales price for the company to achieve its target for 15000 units is 250$.
total production costs are 140$ per unit and non production cost per unit is 0.049.then they’ve added 140+0.0409=140.049
selling price per unit for the bags is 250 and sales director wants to achieve 30& profit margin. so 250*30%=75 and 250-75=175cost gap is calculated as 174-140.049=34.951.
meaning cost gap is only the difference between between desired profit margin figure and total production and non production cost, thats it?
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