Basic Motor Corporation uses target costing. Assume that Basic marketing personn

Question

Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $21,200. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $17,400 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost). a. What price will Basic establish for the QuikCar for the upcoming model year?

Help please. I tried doing 17,400x.25=4,350+17,400=21,750, but it was wrong. What am I doing wrong?

Explanation / Answer

Here Basic require a 20% margin on selling price which is = $21,200 x 20% = $4240

Total New price of car = $17,400 + $4,240 = $21,640

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