A Custom Tailor Wishes to Use Target Profit Pricing to Establish

question 270

Multiple Choice

A custom tailor wishes to use target profit pricing to establish a price for a custom-designed business suit. Assume variable cost is $200 per suit, fixed cost is $44,000, and the target profit is $50,000 based on a volume of 50 suits. What price should be charged for a typical custom suit?

• A) $520
• B) $1,040
• C) $1,880
• D) $2,080
• E) $10,000

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Definitions:

Total Cost

The sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.

Fixed Cost

Costs that do not change with the level of output or production, such as rent, salaries, and insurance, which are incurred regardless of business activity levels.

Total Cost

The complete amount of expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Quantity Change

An alteration in the amount of goods or services supplied or demanded in a market.