Target profit margin

topcat

Another one

how do i work out part B please i can not figure it out for some reason and have a sneaky suspicion it is staring me right in the face



thank you

SandyHood

The expression read the full question is applicable.
Now that you know that the product is viable at a price of £40 provided that fixed production costs are no more than £8,000,000 for the 500,000 units they expect to sell you can compare that target cost with the £8,500,000 expected cost for that level of production. They need £8 million or less, the engineers say it will cost £8.5 million. So £40 gets a NO.

You also know that at a price of £50 the target fixed production cost is £9,460,000 but the engineers say it will cost £8,500,000.
It is just like going to the checkout in a supermarket prepared to pay up to £9,460 and being told you only have to pay £8,500. So £50 gets a YES

Does that make sense?

topcat

SandyHood wrote: »

The expression read the full question is applicable.
Now that you know that the product is viable at a price of £40 provided that fixed production costs are no more than £8,000,000 for the 500,000 units they expect to sell you can compare that target cost with the £8,500,000 expected cost for that level of production. They need £8 million or less, the engineers say it will cost £8.5 million. So £40 gets a NO.

You also know that at a price of £50 the target fixed production cost is £9,460,000 but the engineers say it will cost £8,500,000.
It is just like going to the checkout in a supermarket prepared to pay up to £9,460 and being told you only have to pay £8,500. So £50 gets a YES

Does that make sense?

Hi Sandy,

Thank you very much for this so late on a Sunday night to much appreciated :thumbup1: , not sure why i did not get it first time makes perfect sense the way you have explained it