Question

Gibson instruments is planning to produce and market a new line of guitars. the current market price for similar guitars is $1,200, and gibson would like to make a 30% profit on cost. what should gibson’s target cost be?

Answer 1

Given:
Current market price of similar guitar 1,200
30% profit on cost.

Sales : 130%
Cost : - 100%
Profit : 30%

This means that $1,200 is 130% of cost.

$1,200 / 1.3 = $923.10

Gibson's target cost should be $923.10 to make a 30% profit on cost.