Ganges Company makes bulk burlap by the ton. Currently, their manufacturing cost is $215 per unit, and their non-manufacturing cost is $40 per unit. The going market price of the product is $300. Ganges uses
The target price and target cost methodology. If they desire to make a profit of 20% on the price, what must they do?
A) Increase the advertising costs by $15 per unit.
B) Reduce the price they charge by $15 per unit.
C) Reduce the full-product cost by $60 per unit.
D) Reduce the full-product cost by $15 per unit.

Question

Quizplus · Accepted Answer

D) Calculations:
$300 - ($300 × 20%) = $240
$240 - ($215 + $40) = ($15)

Ganges Company Makes Bulk Burlap by the Ton