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The selling price of a product has been set at $600 per unit, and at that price the company expects to sell 5,000 units a month. The required mark-up is 20% of cost and the expected production cost is $520 per unit. What is the target cost gap?
Please don’t simply set test questions for me to answer – say what your problem is and then I will help.
The target cost is 20/120 x 600 = $500.
Therefore the cost gap is 520 – 500 = $20.
Please watch my free lectures where this is all explained. The lectures are a complete free course and cover everything needed to be able to pass the exam well.
Hi John, I have now seen the examples again and have a better understanding of what the question requires. Apologies I wasn’t specific with my problem area with the question; basically the 20/120 threw me off. Thanks!
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