Using the ABC approach to pricing and the following information, calculate the price of the following entrée:
In order to get the desired profit of 10% with after tax rate of 15%, the Company has to basically maintain =((10/(1-0.15)) = 11.7647% of pre tax profit. This means to earn the after tax profit of 10% the Company has to maintain an overall margin of 11.7647% pre-tax.
The Cost of the product as given in the problem is $12
Let's take 100 as the selling price. Then cost of the product should be (100 - 11.7647) = 88.2353
Therefore Selling Price = $12/0.882353 = $13.60
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