Question 1

**Section A**

NovaTech is a startup developing a revolutionary AI-driven translation earpiece. Market research indicates that the maximum selling price the market will bear is $160 per unit. NovaTech's investors require a profit margin of 30% on the selling price.

The current estimated cost to manufacture the earpiece is $125 per unit.

Calculate the target cost gap per unit. (Enter the numerical value only, without the $ sign)

Accepted Answer

1. Calculate the required profit: 30% of $160. 
2. Calculate the target cost: Selling Price - Required Profit. 
3. Calculate the target cost gap: Estimated Cost - Target Cost.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the 30% margin on cost instead of selling price, or subtracting the estimated cost from the selling price directly.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 4

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