Questions: Aiken Cellular has done some research and believes it can be competitive by selling a smartphone for 800, that it plans to manufacture. If Aiken desires a 45% profit on the smartphone, what is the target cost of manufacturing the new smartphone? a.) 650.00 b.) 360.00 c.) 440.00 d.) 800.00

Solution Steps

To find the target cost of manufacturing the smartphone, we need to determine the cost that allows Aiken Cellular to achieve a 45% profit margin on the selling price of $800. The profit margin is calculated as the difference between the selling price and the cost, divided by the cost. We can set up an equation to solve for the cost.

To find the target cost of manufacturing the smartphone, we use the profit margin formula: \[ \text{Profit Margin} = \frac{\text{Selling Price} - \text{Cost}}{\text{Selling Price}} \] Given that the desired profit margin is \(45\%\) or \(0.45\), we can rearrange the formula to solve for the cost.

Rearranging the formula gives us: \[ \text{Cost} = \text{Selling Price} \times (1 - \text{Profit Margin}) \] Substituting the values: \[ \text{Cost} = 800 \times (1 - 0.45) = 800 \times 0.55 \]

Calculating the target cost: \[ \text{Cost} = 800 \times 0.55 = 440 \]

Final Answer