Electronic Component Company Is a Producer of High-End Video and Music

question 6

Multiple Choice

Electronic Component Company is a producer of high-end video and music equipment.ECC currently sells its top of the line "ECC" DVD 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 DVD 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 DVD players per year.
Irrespective of the competitor's price,what is EEC's required selling price if the target profit is 25% of sales and current costs cannot be reduced?

• A)$280.00.
• B)$292.50.
• C)$299.00.
• D)$308.50.
• 210/.75 = $280

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Definitions:

Budgeted Fixed Overhead

The predetermined estimate of the total fixed costs required to produce a specific amount of output over a fixed period.

Budgeted Variable Overhead

Estimated costs that vary with production volume, such as utilities or raw materials, not directly tied to labor or capital.