Question

BB Company is introducing a new range of products. It has established that the target selling prices of the three products are $120, $150 and $210. The company requires a profit mark-up on cost of 45% for all its products. What percentage of the target prices is the target cost in each case?

Answer 1

The required answer is as given below.

68.97% of the target prices is the target cost in each case.

Workings

Calculation of mark-up and percentage of the target prices are as follows for all of the three products.

If target Price is $ 120	If target Price is $ 150	If target Price is $ 210
Let's assume target cost = X Now, mark-up = target selling price - target cost 45% of X = $ 120 - X 0.45X + X = $ 120 1.45X = $ 120 X = $ 120 / 1.45 X = $ 82.76 Now mark-up = $ 120 - $ 82.76 = $ 37.24 Now percentage of the target price can be calculated from the following formula = (Target cost / Target Selling Price) X 100% =($ 82.76 / $ 120) X 100% = 0.6897 X 100% = 68.97 %	Let's assume target cost = X Now, mark-up = target selling price - target cost 45% of X = $ 150 - X 0.45X + X = $ 150 1.45X = $ 150 X = $ 150 / 1.45 X = $ 103.45 Now mark-up = $ 150 - $ 103.45 = $ 46.55 Now percentage of the target price can be calculated from the following formula = (Target cost / Target Selling Price) X 100% =($ 103.45 / $ 150) X 100% = 0.6897 X 100% = 68.97 %	Let's assume target cost = X Now, mark-up = target selling price - target cost 45% of X = $ 210 - X 0.45X + X = $ 210 1.45X = $ 210 X = $ 210 / 1.45 X = $ 144.83 Now mark-up = $ 210 - $ 144.83 = $ 65.17 Now percentage of the target price can be calculated from the following formula = (Target cost / Target Selling Price) X 100% =($ 144.83 / $ 210) X 100% = 0.6897 X 100% = 68.97 %