A Custom Tailor Wishes to Use Target Profit Pricing to Establish

question 270

Multiple Choice

A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?

• A) $520
• B) $1,040
• C) $1,880
• D) $2,080
• E) $10,000

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Definitions:

Supply Shift

A change in the quantity of a product or service that producers are willing and able to sell at all prices, due to factors like technology, production costs, or number of sellers.

Normative Analysis

A type of analysis concerned with what ought to be, focusing on value judgments and statements of what is good or bad.

Socially Desirable

Actions or policies that are beneficial for society as a whole, often considering long-term benefits over short-term gains.

Producer Surplus

The difference between the amount that producers are willing to sell a good for and the actual amount received by them after selling it.