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

question 132

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

Grasp the principles of ethics in business with specific reference to corporate examples like Johnson & Johnson.

Understand biases and their impact on organizational decision-making and perceptions.

Comprehend the strategies and importance of workplace diversity through examples like Verizon.

Learn the concept and implications of stakeholder responsibility within organizations.

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Definitions:

Unit-elastic

A situation in which the percentage change in quantity demanded is equal to the percentage change in price, resulting in no change in total revenue.

Elasticity of Labor Demand

A measure of how the quantity of labor demanded by employers changes in response to a change in wages or salary levels.

Close Substitutes

Products or services that can easily replace each other in consumption, showing a high level of interchangeability.

Resource Demand

The desire for resources (such as labor, capital, and natural resources) based on their contribution to the production process, influenced by factors like technological change and product demand.