PNY Currently Sells Its Primary Product for $85 Per Unit

Multiple Choice

PNY currently sells its primary product for $85 per unit, with a profit margin of 30%. Cost of goods sold totals 40% of the product's total cost. PNY's managers are considering implementing a kaizen costing system. As part of its kaizen costing project, PNY's accountants estimate the price of the product will decline by 20% next year. To maintain the same profit margin, the total cost per unit will have to be reduced by:

A) Exactly 20%
B) More than 20%
C) Less than 20%
D) Cannot be determined