Gotham Products is a price-taker and uses target pricing. Please refer to the following information: How much is the target full product cost per year? Assume all units produced are sold.

Question

Gotham Products is a price-taker and uses target pricing. Please refer to the following information:  How much is the target full product cost per year? Assume all units produced are sold.

Quizplus · Accepted Answer

According to the information provided, Gotham Products uses target pricing. Therefore, the target full product cost per year can be calculated by multiplying the target selling price by the expected annual sales volume. Target full product cost = Target selling price * Expected annual sales volume. 
Using the data given in the table, the target selling price is $30, and the expected annual sales volume is 20,000 units. Therefore, the target full product cost is $30*20,000 = $600,000. 
The best choice is B, as it is the only option that matches the calculated target full product cost per year.

Gotham Products Is a Price-Taker and Uses Target Pricing