Discourse Stationery Company Is a Price-Taker and Uses Target Pricing

question 54

Multiple Choice

Discourse Stationery Company is a price-taker and uses target pricing.The company has completed an analysis of its revenues,costs,and desired profits and has calculated its target full product cost.Refer to the following information: $$\begin{array} { | l | r | l | } \hline \text { Target full product cost } & \$ 500,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 270,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 3 & \text { per unit } \\\hline \text { Production volume } & 140,000 & \text { units per year } \\\hline\end{array}$$ Actual costs are currently higher than target full product cost.Assume all products produced are sold.Assuming that variable costs are dependent on commodity prices and cannot be reduced,what is the target fixed cost?

• A)$230,000
• B)$420,000
• C)$80,000
• D)$500,000

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Definitions:

Tasted Better

A subjective evaluation indicating that something has a more pleasing flavor than expected or compared to others.

Receptor Cells

Specialized cells in the nervous system designed to respond to specific stimuli like light, sound, or chemicals, and convert them into neural signals.

Sense Of Taste

The sensory ability to discern different flavors and substances, primarily through the taste buds on the tongue.

Reproduce

The natural method through which new organisms are produced to guarantee the survival of a species.