David Corporation Manufactures a Single Product That Has a Cost

question 92

Multiple Choice

David Corporation manufactures a single product that has a cost of $250. The company uses a 60% markup on manufacturing cost to arrive at a selling price of $400, which results in a price that is higher than that of the leading competitors. If David adopts the approach known as target costing, the company will first:

• A) Reduce the 60% markup rate.
• B) Re-engineer the product.
• C) Obtain a better understanding of the competitors' prices.
• D) Reduce the $250 cost.
• E) Change to a markup on life cycle cost rather than manufacturing cost.