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Target Cost gap

This topic has 2 replies, 2 voices, and was last updated 4 years ago by John Moffat.

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October 25, 2021 at 5:23 pm #639089
anniebabe
Participant
- Topics: 33
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Please can someone help me understand this question – many thanks.
Product B expected selling price per unit $15.00
Target profit 25% on cost
Current cost $12.60 per unit
what is the cost gap?
answer 60 cents
October 25, 2021 at 5:27 pm #639091
anniebabe
Participant
- Topics: 33
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doesnt matter its the margin mark up thing isnt it
i kept doing 15.00/100 – when it should be 15.00/125
October 26, 2021 at 8:25 am #639116
John Moffat
Keymaster
- Topics: 57
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Yes, it is because the target profit is 25% of the cost and therefore the cost must be 100/125 x $15 = $12. (and, of course, it checks because the profit is 15 – 12 = $3, and this is 25% x $12 🙂 )
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