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

question 58

Multiple Choice

Abbott Company is a price-taker and uses target pricing.The company has just done an analysis of its revenues,costs,and desired profits and has calculated its target full product cost.Assume all products produced are sold.Refer to the following information: $$\begin{array} { | l | r | l | } \hline \text { Target full product cost } & \$ 500,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 260,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 2 & \text { per unit } \\\hline \text { Production volume } & 151,000 & \text { units per year } \\\hline\end{array}$$ Actual costs are currently higher than target full product cost.Assuming that fixed costs cannot be reduced,what are the target total variable costs?

• A)$260,000
• B)$302,000
• C)$240,000
• D)$500,000

Understand the process and importance of discounting in finding present values.

Recognize how compounding frequency affects the effective interest rate.

Interpret the significance of effective and nominal interest rates in financial decisions.

Calculate present and future values of specific amounts under given interest rates and time periods.

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Definitions:

Net Income

The amount of profit left after deducting all costs, taxes, and expenses from total revenue.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life.

Cash Dividends

Payments made by a corporation to its shareholder members, typically in the form of cash, as a distribution of profits.

Accounts Receivable

Money owed to a company by its customers from sales or services rendered on credit.