Fester Company Was Making a Product for $60 and Selling

question 103

Multiple Choice

Fester Company was making a product for $60 and selling it for $80. A competitor began selling the same product for $68. If Fester is to meet the competition's price, and maintain the same amount of profit per unit, what is target cost?

• A) $40
• B) $60
• C) $48
• D) $17
• E) $63

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Definitions:

Merchandise Purchases

The total cost of goods bought for resale during an accounting period.

Raw Materials

The basic materials and components required in the manufacturing process to produce finished goods.

Production

The process of creating goods and services using labor, machinery, and raw materials.

Finished Goods

Items that have finished being manufactured and are prepared for purchase by consumers.