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

question 28

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:
$$\begin{array} { | l | l | l | } \hline \text { Target full product cost } & \$ 510,000 & \text { per year } \\\hline \text { Actual fixed cost } & \$ 280,000 & \text { per year } \\\hline \text { Actual variable cost } & \$ 2 & \text { per unit } \\\hline \text { Production volume } & 152,000 & \text { units per year } \\\hline\end{array}$$
Actual costs are currently higher than target full product cost.Assuming that fixed costs cannot be reduced,how much is the target variable cost?

• A) $230,000
• B) $280,000
• C) $304,000
• D) $510,000

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Definitions:

Master Schedule

A detailed plan that outlines the production and delivery schedule of final products to ensure the efficient management of production operations.

Master Production Schedule

A timetable that specifies what is to be made and when.

Work Centre

is a specific physical location in a manufacturing facility where tasks related to production are carried out, often equipped with necessary machinery and labor.

Linear Programming

A mathematical technique for optimizing a linear objective function, subject to linear equality and linear inequality constraints.