Reference no: EM132707487
Rapid Rivers Corporation currently manufactures and sells canoes for $3,000 and incurs total costs of $2,300 per canoe. Recently, a competitor has introduced a new canoe to the market that is selling for $2,500. To be competitive in the marketplace, management of Rapid Rivers Corp. believes that it must lower its selling price to match the competitor's price. By reducing the selling price, Rapid Rivers Corp.'s Marketing department estimates that sales will increase by 10 percent, even with the new competitor in the market. Currently, Rapid Rivers Corp.'s sales are 100,000 canoes per year
Required:
Question (A) Under cost-plus pricing, what is Rapid Rivers Corp. required selling price to achieve a 15% markup?
Question (B) If costs cannot be reduced and the target profit is changed to cost-plus 20%, what is Rapid River's target selling price?
Question (C) If Rapid Rivers Corp.'s target profit is 25% of the competitor's selling price, what is Rapid Rivers Corp. target cost?
Question (D) If Rapid Rivers Corp. wants to maintain its same income level and the Marketing department is correct, what is Rapid Rivers Corp.'s target cost?
Question (E) Discuss problems that may arise when companies, such as Rapid Rivers Corp., seek to reduce costs to achieve a target cost.
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