Ganges Company Makes Bulk Burlap by the Ton

question 13

Multiple Choice

Ganges Company makes bulk burlap by the ton. Currently, their manufacturing cost is $215 per unit, and their non-manufacturing cost is $40 per unit. The going market price of the product is $300. Ganges uses
The target price and target cost methodology. If they desire to make a profit of 20% on the price, what must they do?

• A) Increase the advertising costs by $15 per unit.
• B) Reduce the price they charge by $15 per unit.
• C) Reduce the full-product cost by $60 per unit.
• D) Reduce the full-product cost by $15 per unit.

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Definitions:

Tax Burden

The total amount of tax paid by individuals or businesses, often expressed as a percentage of income or GDP.

Inelastic

Refers to a condition where the demand for a product or service changes very little when there is a change in its price.

Price Elasticities

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price.

Social Security

A government program that provides financial assistance to retirees, disabled workers, and their families.