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Subject Topic: Help solve problem (Wiley) (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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Daisycpa
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Posted: 13 Jan 2010 at 15:22 | IP Logged  

Based on potential sales of 500 units per year, a new product has estimated traceable costs of $990,000.  What is the target price to obtain a 15% profit margin on sales?

a: $2329

b: $2277

c: $1980

d: $1935

Answer: A

Thanks.

 

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Khush
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Posted: 13 Jan 2010 at 15:30 | IP Logged  

Cost       Profit     Sales

85          15        100

990,000          ;   =990,000*100/85=1,164,7 05

target price = 1,164,705/500 = 2,329

Profit is 15 since 15% profit margin on sales. So trace back and cost is 100-15=85

hope this helps  



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Daisycpa
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Posted: 13 Jan 2010 at 20:29 | IP Logged  

Yes, thank you!

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venchlu
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Posted: 14 Jan 2010 at 16:03 | IP Logged  

Another way to solve the question-

assume target price is P

(500P - $990,000) / 500P = 15%

P= $2329.



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