Flyer company sells a product in a competitive marketplace. market analysis indicates that its product would probably sell at $48 per unit. flyer management desires a 12.5% profit margin on sales. flyer’s current full cost for the product is $44 per unit. 26. the target cost of the company’s product
(a) $44
(b) $42
(c) $43
(d) $40

Option (B) is correct.

Explanation:

Given that,

Selling price per unit = $48

Desired profit margin on sales = 12.5%

Flyer’s current full cost for the product = $44 per unit

Profit = Selling price × profit margin

         = $48 × 12.5%

         = $6

Target cost of unit = Selling price - Profit

                               = $48 - $6

                               = $42

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