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The predicted selling price for a product is $56 per unit. The desire mark-up on cost is 25% and the material cost for the product is estimated to be $16 before allowing for additional materials to allow for shrinkage of 20%( for every 10kg of material going in only 8kg comes out.) Labour is the only cost and only 2 hours needed
Answer
S.P= 56
Mark up = 25/125 x 56 = 11.2
Target cost = 56-11.2 =44.8Materials(100/80 x 16) = 20(Dis is the Part i don’t understand)
i used 80/100 x 16
and without it i can’t derive labour figure
Please explain its 100/80 or 10/80 to multiply 16.
For every 10 kg that we buy, only 8 kg are available for our product.
So….for every 8 kg for the product, we need to buy 10 kg.
If (for example) each kg cost $1.60 to buy, then it would mean that for every 8kg used in the product we would have to pay 10 x 1.60 = $16.
So if 8kg cost $16, then 1 kg cost 10/8 x $1.60 = $2.Please is it that the 2kg is lost in the production process.
Thanks very much
You d bestYes – for every 10kg that we buy, we lose 2kg and therefore are able to use 8kg.
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