Park, SA, Sells One of Its Products for £40 Each

question 18

Essay

Park, SA., sells one of its products for £40 each. Sales volume averages 2,000 units per year. Recently, its main competitor reduced the price of its product to £28. Park expects sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit must be maintained. Information about the product (for production of 2,000) is as follows:
Required:

a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the nonvalue-added cost per unit.
c.
If nonvalue-added costs can be reduced to zero, can the target cost be achieved?

---

Definitions:

Law Of Effect

A principle in psychology stating that behaviors followed by satisfying consequences tend to be repeated, while those followed by unpleasant consequences are less likely to be repeated.

Punished Behaviors

Actions that are met with negative consequences, aiming to decrease the likelihood of those actions being repeated in the future.

Extinction

The process by which a species, genus, or family of organisms becomes permanently lost or dies out.

Therapist

A professional trained in methods of psychological or physical rehabilitation, providing treatment for emotional, behavioral, and mental disorders.