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Forums › Ask CIMA Tutor Forums › Ask CIMA P2 Tutor Forums › Target costing question
if the selling price is said to be £100 with a desired margin of 20% and the production cost is £20, what is the target cost?
i would have assumed you ignore production cost thus target cost should be £80?
Hi there, yes I agree with you.
We start with the selling price of $100
If we are told that the margin needs to be 20% then the target cost will be $80
Because
Cost $80 * 1/1-0.2 = 100
Hope thats ok?
Cath
perfect, Thank you Cath.
You are welcome