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 designed new plant. Because of manufacturing innovations, the
competitor's line will be of comparable quality but priced 50% below Rem's line. The competitor
announced its new line during the week following completion of field work. Ms. Zeen read the announcement
in the newspaper and discussed the situation by telephone with Rem executives. Rem will
meet the lower prices that are high enough to cover variable manufacturing and selling expenses but will
permit recovery of only a portion of fixed costs.
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