A major electronics firm has introduced a line of products that will compete directly with Rem’s primary line, now being produced in the specially…

A major electronics firm has introduced a line of products that will compete directly with Rem’s primaryline, now being produced in the specially designed new plant. Because of manufacturing innovations, thecompetitor’s line will be of comparable quality but priced 50% below Rem’s line. The competitorannounced its new line during the week following completion of field work. Ms. Zeen read the announcementin the newspaper and discussed the situation by telephone with Rem executives. Rem willmeet the lower prices that are high enough to cover variable manufacturing and selling expenses but willpermit recovery of only a portion of fixed costs.

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