Gotham Products Is a Price-Taker and Uses Target Pricing Actual Costs Are Currently Higher Than Target Full Product Cost

question 113

Multiple Choice

Gotham Products is a price-taker and uses target pricing. Gotham has just done an analysis of their revenues, costs and desired profits, and has calculated its target full product cost. Please refer to the following information: $\begin{array}{|l|c|r|}\hline\text { Target full product cost } & \$ 500,000& \text { per year } \\\hline \text { Actual fixed cost } & \$ 280,000 &\text { per year } \\\hline \text { Actual variable cost } & \$ 2 &\text { per unit } \\\hline \text { Production volume } & 150,000 &\text { units per year }\\\hline\end{array}$

Actual costs are currently higher than target full product cost. Assuming that fixed costs cannot be reduced, how much is the target variable cost?

• A) $180,000
• B) $300,000
• C) $220,000
• D) $500,000

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Definitions:

Condensed Structural Formula

A method of representing the molecular structure of a compound in a simplified manner, showing how atoms are bonded without detailing the actual bond locations.

Resonance Structures

Different Lewis structures for the same molecule that depict the delocalization of electrons within the molecule.

Major Contributor

In resonance theory, refers to the resonance structure that makes the largest contribution to the overall hybrid structure based on stability.

Formal Charges

Formal charges refer to the charge assigned to an atom in a molecule, assuming that electrons in all chemical bonds are shared equally between atoms, despite the actual electronegativity of the atoms.