Fowler Company is a price - taker and uses target pricing. Refer to the following information: Production volume 601,000 units per year Market price Desired operating income $30 per unit 16% of total assets Total assets $13,900,000 Variable cost per unit $18 per unit $5,400,000 per year Fixed cost per year With the current cost structure, Fowler cannot achieve its profit goals. It will have to reduce either the fixed costs or the variable costs. Assuming that variable costs cannot be reduced, what are the target fixed costs per year? Assume all units produced are sold. O A. $12,630,000 O B. $10,818,000 OC. $5,400,000 O D. $4,988,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Fowler Company is a price - taker and uses target pricing. Refer to the following information:
Production volume
601,000 units per year
Market price
Desired operating income
$30 per unit
16% of total assets
Total assets
$13,900,000
Variable cost per unit
$18 per unit
Fixed cost per year
$5,400,000 per year
With the current cost structure, Fowler cannot achieve its profit goals. It will have to reduce either the fixed costs or the variable costs. Assuming that variable costs cannot be reduced, what are the target fixed costs per year? Assume all units
produced are sold.
O A. $12,630,000
O B. $10,818,000
OC. $5,400,000
O D. $4,988,000
Transcribed Image Text:Fowler Company is a price - taker and uses target pricing. Refer to the following information: Production volume 601,000 units per year Market price Desired operating income $30 per unit 16% of total assets Total assets $13,900,000 Variable cost per unit $18 per unit Fixed cost per year $5,400,000 per year With the current cost structure, Fowler cannot achieve its profit goals. It will have to reduce either the fixed costs or the variable costs. Assuming that variable costs cannot be reduced, what are the target fixed costs per year? Assume all units produced are sold. O A. $12,630,000 O B. $10,818,000 OC. $5,400,000 O D. $4,988,000
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