Ortiz Company is a price-taker and uses target pricing. Refer to the following information: Production volume 600,000 units per year Market price $30 per unit Desired operating income 15% 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, Ortiz cannot achieve its profit goals. It will have to reduce either the fixed costs or the variable costs. Assuming that fixed costs cannot be reduced, what are the target variable costs per year? Assume all units produced are sold. $10,515,000 $10,800,000 $5,400,000 $15,915,000
Ortiz Company is a price-taker and uses target pricing. Refer to the following information: Production volume 600,000 units per year Market price $30 per unit Desired operating income 15% 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, Ortiz cannot achieve its profit goals. It will have to reduce either the fixed costs or the variable costs. Assuming that fixed costs cannot be reduced, what are the target variable costs per year? Assume all units produced are sold. $10,515,000 $10,800,000 $5,400,000 $15,915,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ortiz Company is a price-taker and
uses target pricing. Refer to the
following information: Production
volume 600,000 units per year Market
price $30 per unit Desired operating
income 15% 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, Ortiz cannot achieve its
profit goals. It will have to reduce
either the fixed costs or the variable
costs. Assuming that fixed costs cannot
be reduced, what are the target
variable costs per year? Assume all
units produced are sold. $10,515,000
$10,800,000 $5,400,000 $15,915,000
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