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

question 27

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: $$\begin{array} { | l | l | l | } \hline \text { Target full product cost } & \$ 510,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 280,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 2 & \text { per unit } \\\hline \text { Production volume } & 152,000 & \text { units per year } \\\hline\end{array}$$ 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) $280,000
• B) $304,000
• C) $230,000
• D) $510,000

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Definitions:

Network Structure

An organizational design where entities are connected less hierarchically and more through a flexible arrangement of nodes, facilitating information flow and collaboration.

Global Competition

The scenario where businesses compete across national borders in various markets, driven by increasingly interconnected world economies.

Organizational Design

The process of shaping an organization's structure and roles to align with its objectives, strategy, and environment.

Functional Structure

An organizational design that groups employees based on their specialized roles or functions, enhancing efficiency and expertise.