Pueblo Products Is a Price-Taker and Uses Target Pricing

question 118

Multiple Choice

Pueblo Products is a price-taker and uses target pricing. Pueblo has just done an analysis of their revenues, costs and desired profits, and has calculated its target full cost. Please refer to the following information: Actual costs are currently higher than target full cost. Assuming that variable costs are dependent on commodity prices and CANNOT be reduced, how much is the target fixed cost?

• A)$160,000
• B)$175,000
• C)$150,000
• D)$140,000

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Definitions:

Credit

A financial agreement where a borrower receives something of value now and agrees to repay the lender at a later date, often with interest.

Equity Account

An account representing the owner's or shareholders' interest in a company, reflected in the capital stock, retained earnings, and contributed surplus on the balance sheet.

Unearned Revenue

Money received by a company for products or services yet to be delivered or performed, recorded as a liability on the balance sheet until earned.

Retained Earnings

The segment of net income that is not issued as dividends, reserved by the company for reinvestment in its essential business or for settling debts.