Question

calculate the estimated target cost for manufacturing if end-user price is $300 and the product is delivered via a distributor whose profit margin is 25% and retailer whose profit margin is 40% .the manufacturer expect a profit margin of 30%.

Answer 1

Let the estimated target cost to be Y

Y + ( Y x 30%) + 25% x ( Y+( Y x 30%) ) + 40% x ( (Y + ( Y x 30%) + ( 25% x ( Y + ( Y x 30%) ) = 300

Y + 0.3 Y + 25% x ( Y + 0.3 Y ) +40% x ( 1.3Y + (25% x ( Y + 0.3 Y ) )) = 300

1.3 Y + 25% x 1.30 Y + 40% x (1.3Y + ( 25% x 1.03 Y ) ) = 300

1.3 Y + 0.325 Y + 40% x(1.3Y + 0.325 Y )= 300

1.3 Y + 0.325 Y + 40% x 1.625 Y= 300

1.3 Y + 0.325 Y + 0.65 Y = 300

2.275 Y = 300

Y = 300 /2.275

Y = $ 131.861

or

Y = $ 132

Estimated target manufacturing cost = $ 131.861 or $ 132