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I am going through the revision notes but i am confused on the question for lifecyle costing/target costing part (a). Don’t understand how the 1.50 is calculated
The target is a 50% mark-up (on cost). So if cost is 100 then profit is 50 and therefore the selling price is 150. To put it the other way round, for every 150 selling price, the cost must be 100.
(Have you watched the main lectures, because I go through an example with exactly the same problem in the lecture on life-cycle costing!)
can you please help me how the following anwser comes about
what is the target cost gap for product x when given the follwoing information
product x target selling price is $10
target profit is 25% on cost
current cost is £8.40 per unit
The target cost is 100/125 x 10 = $8
So the cost gap is 8.40 – 8 = $0.40
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