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1 October, 21:30

Domingo Corporation makes a variety of headphones with logos. The company has discovered a new market for wireless headphones with logos. Market research indicates that these headphones would sell well in the market priced at $34.80 each. Domingo desires an operating profit of 20 percent of costs.

Required:

What is the highest acceptable manufacturing cost for which Domingo would be willing to produce the headphones?

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  1. 1 October, 21:52
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    Manufacturing cost = $29 per unit

    Explanation:

    Giving the following information:

    Market research indicates that these headphones would sell well in the market priced at $34.80 each. Domingo desires an operating profit of 20 percent of costs.

    To calculate the cost we need to use the following formula:

    manufacturing cost = selling price / (1 + mark up) = 34.8/1.20 = $29
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