PEV Section 2 - Target Cost Question

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Everybody seems to have put £450 for the answer.

Isn't it £1,000/1.55 to give an answer of £645.16?

This then reversed means that if your product cost £645.16 to make, this plus the 55% profit margin totals the £1,000 selling price.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV Section 2 - Target Cost Question

    Thats mark up not margin !
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV Section 2 - Target Cost Question

    Target costing is where the business first decides how much they want to sell the item for, then they decide how much profit they would like to make and then:

    Selling price
    - profit
    = target cost.

    In this case
    Selling price = £1000
    Profit = £ 550 (1000 x 55%)
    Target cost = £ 450

    Hope this helps

    Stacey
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV Section 2 - Target Cost Question

    Boo hoo hoooooooooooo
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV Section 2 - Target Cost Question

    Sorry to make you cry further, but we asked our teacher afterwards and he confirmed it was £450. It's quite surprising to see how many people weren't taught it. We weren't either.
    I can't imagin you dropped more than 1 mark on that question, though! :D

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