Ganges Company Makes Bulk Burlap by the Tonne

question 20

Multiple Choice

Ganges Company makes bulk burlap by the tonne. Currently, their manufacturing cost is $215 per unit, and their non- manufacturing cost is $40 per unit. The going market price of the product is $300. Ganges uses the target price and target cost methodology. If they desire to make a profit of 20% on the price, what must they do?

• A)Reduce the full- product cost by $15 per unit.
• B)Increase the advertising costs by $15 per unit.
• C)Reduce the full- product cost by $60 per unit.
• D)Reduce the price they charge by $15 per unit.

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Definitions:

Perfect Tender Rule

A legal principle in sales law that allows buyers to reject goods if they fail to conform precisely to the terms of the contract.

Slightest Defect

Refers to the minimum imperfection or fault in something that can lead to legal liability or the rejection of a product or service.

Destroy

The act of causing something to cease to exist or to become inoperative or unserviceable.

Replacement Shipment

Sending out a new or additional shipment to replace defective or missing products originally dispatched.