WDY Corporation Currently Sells Its Primary Product for $85 Per

question 65

Multiple Choice

WDY Corporation currently sells its primary product for $85 per unit, with a profit margin of 30%. Cost of goods sold totals 40% of the product's total cost. WDY's managers are considering implementing a Kaizen costing system.
As part of its Kaizen costing project, WDY's accountants estimate the price of the product will decline by 20% next year. To maintain the same profit margin, the total cost per unit will have to be reduced by:

• A) Less than 20%
• B) Exactly 20%
• C) More than 20%
• D) Cannot be determined

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Definitions:

Unemployment Rate

The unemployment rate measures the percentage of the labor force that is jobless and actively looking for employment.

Decreased

Pertains to a reduction in amount, size, intensity, or number.

Time-Series Graph

A graphical representation showing how a given data set changes over time.

Scaling

The process of adjusting the size or volume of an operation to meet changes in demand or to improve efficiency.