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Jobbz Co has been asked to quote for a job. The following cost estimates have been made:
Cost $
Direct materials 700
Direct labour 1,600
Other expenses 680
Production overhead 4601. If Jobbz Co uses a profit margin of 20%, what is the selling price $ for the job?
im getting 4128 by doing 3440×120%.. since 100% is 3440 and 688 is 20% profit.
The question is taken from acca studyhub and the answer given is
The correct answer is 4,300.
Total cost of the job = $700 + $1,600 + $680 + $460 = $3,440
Margin: remember the selling price = 100%
Selling price (100%) = $3,440 / 0.8 = $4,300
Welcome to the Opentuition forums. Your initial answer was wrong because a margin of twenty percent is being asked for, not a markup of twenty percent. For example, if a good cost £80 to make and a twenty percent markup was required, the calculation would be 80 x 1.2 = £96. If a twenty percent margin were required on same good it would be calculated as above £80 / 0.8 =£100. This is equivalent to a twenty five percent markup. Hope this helps.
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