Electronic Component Company (ECC) Is a Producer of High-End Video

question 11

Multiple Choice

Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells its top of the line "ECC" video player for a price of $250. It costs ECC $210 to make the player. ECC's main competitor is coming to market with a new video player that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%. ECC currently sells 200,000 video players per year.
Assuming sales and marketing are not correct in their estimation and the volume of sales is not changed and ECC meets the competitive price, what is the target cost if ECC wants to maintain its same income level?

• A) $210.
• B) $200.
• C) $190.
• D) $180.

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Definitions:

Business Definition

The clear outline or description of a company's field of operation, goals, and the products or services it provides.

Organizational Foundation

The fundamental principles or underlying framework that guide the formation and operation of an organization.

Strategic Levels

Different layers or tiers within an organization at which strategy is formulated, typically including corporate, business unit, and operational levels.

Core Values

Core values or standards that direct an organization's behavior internally and influence its interactions with the outside environment.