Computation of Target cost
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The question:
Market research sets the price of a clay pot for at $5.20 each. Management determines a margin of 30% is required for long-term profitability. The company produced 14,000 pots in June. What is the total target cost June?
I got the follwoing:
Selling price - Required profit margin = Target cost
Selling price $5.20
Less required margin -1.56 = .3x5.2
Target cost $3.64
Total Target cost $50,960 = 3.64 x14000
Answer: $50,960
Is my process for calculation correct? My answer correct?
Thank you
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The solution explains the computation of target cost supported by a practical example.
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