Question

Cheng builds replica miniature cabinets. His costs for each cabinet are $28 each. A consultant tells Cheng that the average margin in his industry is 49%. Cheng currently sells the cabinets for $42, but thinks he should consider using the industry average margin as his target goal.

Answer 1

check the calculations below.

You didn´t post the complete information of the exercise, I searched the exercise online and tried to ask the most useful question.

Step-by-step explanation:

a) current margin = Sale price - Cost

= $42 - $28 = $14 per unit

(b) Selling price if margin is 49%

= Cost / (1-0.49)

= 28 / 0.51

= $55

Profit = 55*49% = 227

(c) Price to consumer = Selling price / (1-0.1)

= 55/ 0.9

= $61.1

(d) Price to Consumer = Selling price from Chengg + Margin

= 61 + 10 = $71