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

question 39

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.
What is the target cost if target profit is 20% of sales and ECC must meet the competitive price of $220?

• A) $168.50.
• B) $176.00.
• C) $184.25.
• D) $190.00.

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Definitions:

Regression Equation

A formula that represents the relationship between dependent and independent variables in a regression model.

Unit Increase

A term used to describe a single step increase in the value of an independent variable and its effect on the dependent variable in a model.

Regression Equation

An equation that represents the relationship between dependent and independent variables, used to predict outcomes.

Holding Constant

A method in statistical analysis where certain variables are kept fixed to isolate the effect of one or more variables under investigation.