gnite Products is a price - taker. The company produces large spools of electrical wire in a highly competitive market; thus, it uses target pricing. The current market price of the electric wire is $700 per unit. The company has $3,000,000 in verage assets, and the desired profit is a return of 9% on assets. Assume all products produced are sold. The company provides the following information: Sales volume "ariable costs Fixed costs 110,000 $660 $12,000,000 per year units per year per unit fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the desired target? OA. $72,600,000 O B. $12,000,000 OC. $7,870,000 O D. $270,000
gnite Products is a price - taker. The company produces large spools of electrical wire in a highly competitive market; thus, it uses target pricing. The current market price of the electric wire is $700 per unit. The company has $3,000,000 in verage assets, and the desired profit is a return of 9% on assets. Assume all products produced are sold. The company provides the following information: Sales volume "ariable costs Fixed costs 110,000 $660 $12,000,000 per year units per year per unit fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the desired target? OA. $72,600,000 O B. $12,000,000 OC. $7,870,000 O D. $270,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ignite Products is a price - taker. The company produces large spools of electrical wire in a highly competitive market; thus, it uses target pricing. The current market price of the electric wire is $700 per unit. The company has $3,000,000 in
average assets, and the desired profit is a return of 9% on assets. Assume all products produced are sold. The company provides the following information:
Sales volume
110,000
units per year
Variable costs
$660
per unit
Fixed costs
$12,000,000 per year
If fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the desired target?
O A. $72,600.000
O B. $12,000,000
OC. $7,870,000
O D. $270,000
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