Nemesis Company manufactures water skis. Nemesis pursues a target pricing strategy. Please review the data below: Which of the following would be the desired cost reduction? (Please round all amounts to nearest cent.)

Question

Nemesis Company manufactures water skis. Nemesis pursues a target pricing strategy. Please review the data below:  Which of the following would be the desired cost reduction? (Please round all amounts to nearest cent.)

Quizplus · Accepted Answer

Desired cost reduction = selling price - target profit - current cost
The current cost is $95. Target profit is $20. Selling price is $140.
Desired cost reduction = $140 - $20 - $95 = $25 - $20 = $5. 
Therefore, the desired cost reduction is a reduction of $9.00, as it is closest to $5.

Nemesis Company Manufactures Water Skis