Bakersfield Manufacturing produces agricultural tools including a hand tiller. Their current full-product cost for a hand tiller is $20. Bakersfield wishes to make a 15% profit on the selling price. Bakersfield uses a target pricing strategy. The current competitive market price for this product is $22.00. What would be the most appropriate response to this situation?

Question

Quizplus · Accepted Answer

Since Bakersfield has a target pricing strategy and wants to make a 15% profit on the selling price, they need to adjust their full-product cost to achieve the desired profit margin. Conducting a value engineering study would help them identify cost-saving opportunities and find ways to optimize their production process without sacrificing quality or functionality. This would enable Bakersfield to offer the hand tiller at a competitive market price while also meeting their profit goals. Option A is not viable since cost plus pricing would not take into account the desired profit margin. Options C and D are not relevant to the situation described.

Bakersfield Manufacturing Produces Agricultural Tools Including a Hand Tiller