Montana Produces Bicycles in a Highly Competitive Market

question 58

Multiple Choice

Montana produces bicycles in a highly competitive market. During the past year, the company has added a 30% markup on the $250 manufacturing cost for one of its most popular models. A new competitor manufactures a similar model, has established a $300 selling price, and is seriously eroding Montana's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales. If target costing is used, which of the following choices correctly denotes (1) the price that Montana will charge and (2) company's target cost respectively?

• A)300, 210
• B)300, 240
• C)300, 250
• D)325, 240
• E)325, 250

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Definitions:

Adult Population

The segment of the population that comprises individuals who are considered adults, typically measured by age, and which can participate in activities such as voting and working.

Labor-force Participation Rate

The percentage of the working-age population that is either employed or actively looking for employment.

Population Participation

Often referred to as the labor force participation rate, it measures the proportion of the working-age population that is employed or actively looking for employment.

Labor Force

The total number of people who are available to work, including those who are employed and those who are unemployed but seeking work.