Rivers Industries produces and sells electronic sound equipment.The company has production capacity of 20,000
A)$25
B)$17
C)$16
D)$15

Question

Quizplus · Accepted Answer

Without any additional information, we can use the cost-plus pricing method, in which a markup is added to the cost of production to determine the price. Assuming that the cost of production for Rivers Industries is lower than $16, this pricing strategy would provide a reasonable profit margin.

Option A) $25 seems too high, as it would likely exceed the price that the market is willing to pay for electronic sound equipment. Option B) $17 could be a possibility, but without knowing the company's cost structure, we cannot determine if it would provide a reasonable profit margin. Option D) $15 might not provide enough of a profit margin for the company to remain sustainable.

Therefore, the best choice is C) $16.

Rivers Industries Produces and Sells Electronic Sound Equipment