A Custom Kitchen Cabinet Storeowner Wishes to Use Target Return-On-Sales

question 166

Multiple Choice

A custom kitchen cabinet storeowner wishes to use target return-on-sales pricing to establish a price for a typical section of cabinets.Assume variable cost is $200 per unit, fixed cost is $44,000, and the storeowner desires a target profit of 20 percent of sales on an annual volume of 400 cabinets.What price should be charged for a typical cabinet section?

• A)$372.00
• B)$311.00
• C)$445.50
• D)$395.75
• E)$387.50

---

Definitions:

Market Price

The present price at which a service or asset is available for purchase or sale in the open market.

Economic Profits

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, representing excess earnings over the normal rate of return.

Perfectly Competitive Market

A market structure characterized by many buyers and sellers, identical products, and no barriers to entry or exit, leading to efficient price determination.

Short Run

A period in which at least one factor of production is fixed and cannot be changed.