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Does anybody practise the revision kit p5 2012,
I have a concern in question 3 ( HEG – APM 12/07), i can’t understand why they calculate sales for part a is = 625m x 4% x 2.4$ x 3/4=
the concern is 3/4 i try to understand but i can not, sbd help me?
thanks a lot
The 33 1/3 (or 4/3) is a markup required by SFG from HSC’s sandwiches. To reverse it, you change it into an inverse to 3/4 of $2.40 to know the price that HSC is selling. That makes it $1.80 per sandwich, or $0.60 profit or a 33.33% mark-up.
Hi angry,
but 2.4 is selling price, the calculation is for sales……
why here we calculate sales, we have to convert into 1.8 because 1.8 is costcould u explain more?
thanks
Glad you are enlightened. 😀
It’s a simple concept of target costing by working backwards from the selling price to the cost.
You can also try finding a similar question with a company called Great Western Cake Company (GWCC) from June 2006, for you to further appreciate the target costing concept.
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