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could you kindly explain what the different between cost plus costing and mark up in the target costing
of example if the company us cost plus costing and want profit 20% the selling price 2$
and the the company use mark up 15% on cost
how should i calculate the profit base on desire profit 20% or mark up 15%
i am really struggling with PM i tried all the questions in kaplan and BPP exam kit and i was able solved most of them but every time i sit the PM exam it like i am sitting the exam for different and new syllabus .
would you kindly advise what should i do?. i want to sit the exam with confident to score at lease 70% because if i aimed just to 50 % i will never pass.Have you sat the exam recently?
If so, how do you know how well you have done?Or when do you intend to sit it again?
Anyway I will try to help
Cost-plus pricing or (mark-up pricing)
You calculate the average cost of production and then add a predetermined (agreed) percentage mark-up or profit margin. Which is:
Markup – involves adding a percentage to the cost to determine the selling price.
Margin -The total cost of production and then add a desired profit margin to determine the selling price.Mark up 20% on 100 cost = 100 * 1.2 = 120 selling price
Mark up 15% on cost is x * 1.15 so if it’s 100 cost it is 115Margin of 20%
So convert 20% to a decimal 0.2
Subtract from 1
So it becomes 0.80100 / 0.8 = 125
For profit base you need to
If you want a profit of 20 based on a 20% profit margin, the selling price would be 100.20/0.2 = 100
.thank you for the explanation, i sit an exam but i faced Technical issue in the second week so i lost the exam how ever i wouldn’t pass it even though this is the 4 attempt
as i understood that cost plus is to determent a profit from the cost whether it is by mark up or margin.
and the target cost is setting selling price then desirable profit and base on the determine the cost gap between the actual production cost and the cost they want to earn the desirable profit.
in the question all the cost number was above hundred and they gave me selling price of 2$ and desirable profit of 20% okay
if i want a 20% profit from selling price 2$ by cost plus pricing it would be 2/80*20= the profit will be 0.5 while the cost 1.5
but then they told me that the company use mark up on sell of 15% ?? how is that the desirable profit is 20% while the mark up is 15% and if that the case the number is to small compare to the actual production cost above 100 ???
if i used the mark up the cost will be 2/115*85=1.47 this will not give me a profit of 20%
Sorry unfortunately I am not prepared to discuss the exam or exam questions
Until I see it for myself or that I am confident you have understood the question or have the right information.
It wouldn’t be professional of me to answer what you think the question was on.
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