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

question 195

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

---

Definitions:

HR Departments

Organizational units responsible for managing workforce-related issues such as recruitment, training, benefits, and compliance with labor laws.

Market Niches

Specialized segments of the market catered to by businesses providing unique or narrowly focused products or services.

Vendor Checklist

A detailed list of criteria and requirements used to evaluate and select third-party vendors or suppliers.

Outsourcing Problems

Challenges encountered when tasks or services are contracted out to external suppliers, including quality control, communication barriers, and loss of managerial control.