Palms, SA, Sells One of Its Products for £80 Each

question 146

Essay

Palms, SA., sells one of its products for £80 each. Sales volume averages 2,000 units per year. Recently, its main competitor reduced the price of its product to £56. Palms expects its 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?

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Definitions:

Reinforcement

A concept in behavioral science where the probability of a behavior occurring is increased by following it with a positive or negative stimulus.

Fixed Interval Schedule

A type of conditioning schedule where rewards (reinforcements) are provided at fixed time intervals, regardless of the behavior's occurrence.

Reinforcement Theory

A psychological perspective emphasizing that behavior can be shaped by controlling the outcomes and consequences of that behavior.

Behavior

Actions, reactions, or conduct of individuals, often studied in psychology and behavioral sciences.