Chastain Company Recently Implemented an Activity-Based Costing System

question 25

Multiple Choice

Chastain Company recently implemented an activity-based costing system.As a result of the ABC allocations,the cost of one of the company's products was determined to be above its current selling price.Due to competition,the company is unable to raise the price of this product.Which of the following options is most reasonable,assuming Chastain employs a target pricing strategy?

• A) Use less expensive materials to make the product.
• B) Raise prices under the assumption that the company's competitors will follow suit.
• C) Target advertising to high-income customers.
• D) Return to the old allocation method, which produces a lower amount of estimated cost.

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Definitions:

Company Stock

Shares of ownership in a corporation, providing shareholders with a claim to part of the company’s profits and assets.

Fixed Price

A pricing strategy where the price of a product or service is set and does not change regardless of variations in cost of production or market demand.

Employee Share Purchase Plans

Programs that allow employees to purchase company shares often at a discounted price, as part of their benefits package.

Market Value

The current price at which an asset or service can be bought or sold in an open market.