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

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Definitions:

Trial

A process of testing or experimenting with a product, service, or idea to evaluate its effectiveness or market potential before full-scale launch.

Urgency

A priority or immediate need that requires swift action or attention.

Prospect's Objection

A potential customer's expressed concerns or hesitations about a product or service during the sales process.

Price of the Automobile

The financial cost or value at which a vehicle is offered for sale, determined by factors like brand, model, features, and market demand.