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

question 80

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.Refer to the following information:
$$\begin{array} { | l | l | l | } \hline \text { Target full product cost } & \$ 520,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 281,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 2 & \text { per unit } \\\hline \text { Production volume } & 152,000 & \text { units per year } \\\hline\end{array}$$
Actual costs are currently higher than target full product cost.Assuming that fixed costs cannot be reduced,how much is the target variable cost per unit?

• A) $1.85
• B) $1.57
• C) $2.00
• D) $3.42

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Definitions:

Action

In marketing, refers to the desired behavior or response a marketer wants from the audience, such as making a purchase or signing up for a newsletter.

Lagged Effect

A delayed response to a marketing or advertising campaign, where the impact on consumer behavior or sales becomes apparent after a period of time.

IMC Strategy

An approach to market communication that integrates and coordinates various promotional tools and channels to deliver a clear, consistent, and compelling message about an organization and its products.

Exposure

The measure of how much a target audience sees or interacts with an advertisement or media content.