Samples Corporation Would Like to Use Target Costing for a New

question 32

Multiple Choice

Samples Corporation would like to use target costing for a new product it is considering introducing.At a selling price of $21 per unit,management projects sales of 20,000 units.The new product would require an investment of $400,000.The desired return on investment is 12%.
-Charging clients based on the value-based pricing approach,a business consultant is working on the assumption that

• A)clients are willing to share part of their gain with the consultant.
• B)clients are willing to pay for the service regardless of the outcomes and results.
• C)clients are searching for advisors asking for the lowest price.
• D)clients' preferences are irrelevant.

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Definitions:

Induced Consumption

Describes consumer spending that increases when income increases and decreases when income decreases, directly related to the level of disposable income.

Average Propensity

The proportion of total income or revenue that is spent on a certain category of expenditures or savings.

Save

The process of setting aside a portion of current income for future use or investment.

Obtrusively Expensive

Describing an item or service whose price is excessively high, attracting attention in a way that may seem offensive or overt.