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

question 49

Multiple Choice

Gotham Products is a price-taker and uses target pricing. Gotham has just done an analysis of their revenues, costs and desired profits, and has calculated its target full product cost. Please refer to the following information: $$\begin{array} { | l | r | r|} \hline \text { Target full product cost } & \$ 500,000& \text { per year } \\\hline \text { Actual fixed cost } & \$ 280,000 &\text { per year } \\\hline \text { Actual variable cost } & \$ 2& \text { per unit } \\\hline \text { Production volume } & 150,000 &\text { units per year } \\\hline\end{array}$$ Actual costs are currently higher than target full product cost.
- Assuming that variable costs are dependent on commodity prices and cannot be reduced, how much is the target fixed cost?

• A) $180,000
• B) $300,000
• C) $200,000
• D) $500,000

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