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David Corporation manufactures a single product that has a cost of $250. The company uses a...

David Corporation manufactures a single product that has a cost of $250. The company uses a 60% markup on manufacturing cost to arrive at a selling price of $400, which results in a price that is higher than that of the leading competitors. If David adopts the approach known as target costing, the company will first:

Multiple Choice

  • Re-engineer the product.

  • Obtain a better understanding of the competitors' prices.

  • Reduce the 60% markup rate.

  • Reduce the $250 cost.

  • Change to a markup on life cycle cost rather than manufacturing cost.

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