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Veronika
9 days ago
14

Chester Company plans to introduce a new product. A market research specialist claims that 20,000 units can be sold at a $100 se

lling price. Assuming the company desires a profit margin of 22% of sales, what is the target cost per unit
Business
1 answer:
soldi70 [3.4K]9 days ago
5 0

Response:

$78

Clarification:

Profit margin refers to the ratio of profit in relation to sales, where profit is calculated as the difference between sales revenue and costs.

Thus, profit margin computes the ratio of this difference to the sales figures.

Given a target margin of 22%, this can be expressed as

22% =  profit/(20,000 units × $100)

Profit = $440,000

Total expenses = $2,000,000 - $440,000

= $1,560,000

Target cost per unit is then calculated as $1,560,000 divided by 20,000

= $78

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