Kleenrite Company Manufactures a Single Product That Has a Cost

question 39

Multiple Choice

Kleenrite Company manufactures a single product that has a cost of $450. The company uses a 40% markup on cost to arrive at a selling price of $630, which results in a price that virtually always exceeds that of its competitors, the market leaders. If Kleenrite changes to the approach known as target costing, the company will first:

• A)undertake a thorough analysis of competitors' prices.
• B)change the markup so that it is based on sales rather than based on cost.
• C)reduce its 40% markup rate.
• D)trim its $450 cost.
• E)attempt to re-engineer its product.

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Definitions:

iPad

A line of tablet computers designed and marketed by Apple Inc., known for its touch screen interface and wide range of applications.

Market Share

The percentage of total sales or revenue that a company or product commands in a particular market or industry.

Product Life Cycle

The stages a product goes through from development and introduction to the market, to growth, maturity, and eventually decline.

Broaden Distribution

The expansion of a product's availability across a wider range of outlets or geographical areas to increase market reach and customer access.