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Hello
In this question in kaplan kit book said : A product has a prime cost of $12, variable overheads of $3 per unit and fixed overheads of $6 per unit. ask if pricing policy is “Net margin of 14% on selling price ”
Our answer is 21 × 100/86 = $24.40
my question is why net margin is 21 and is not 12 + 3= 15Thank you
The net margin is not 21 !!!
The cost is $21 (12 + 3 + 6), and since the margin is 14% of the selling price the cost must be 86% of the selling price.
There the selling price is 21 / 86% = $24.42
(and to check, the margin is 24.42 – 21 = $3.42, which is 14% of $24.42.
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