Trina Productions 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 $800 per unit. The company has $3,100,000 in average assets, and the desired profit is a return of 6% on assets. Assume all products produced are sold. The company provides the following information:

Sales volume 110,000 units per year
Variable costs $690 per unit
Fixed costs $13,000,000 per year

If fixed costs cannot be reduced, how much reduction in variable costs will be needed to achieve the desired target?
A) $186,000
B) $13,000,000
C) $1,086,000
D) $75,900,000


C .C)
Variable costs ($690 per unit) $75,900,000
Fixed costs 13,000,000
Total costs $88,900,000

Total sales ($800 per unit) $88,000,000
Less: Target profit ($3,100,000 x 6%) 186,000
Target cost $87,814,000

Variable costs must be reduced by $1,086,000 ($88,900,000 - $87,814,000 ) to achieve the profit target.

Business

You might also like to view...

Which of the following is Giant Beanstalks' upstream partner?

A) the management of Greenleaf B) the farmers of Riverdale C) the trucks that carry Giant Beanstalks' products to Greenleaf D) the end-consumers who buy the canned vegetables from Greenleaf E) the logistics division of Giant Beanstalk

Business

Martin has never filed a 2019 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2019 tax return?

A. 2026. B. 2022. C. 2027. D. 2023. E. None of the choices are correct.

Business

Anna obtains a business liability insurance policy for her Brew & Bagels Coffee Shop from ChoiceFirst Insurance Company. When an event occurs that gives rise to a claim, each party has a duty to A) cooperate in an investigation to determine the facts

B) file a suit against the other so that a court can settle the claim. C) find a third party on whom to impose liability. D) pay any outstanding premium or refund any unearned amount.

Business

Using a traditional organizational hierarchy to gather information and control activity

A. results in a long time for information to reach individual employees. B. minimizes distortion of information when passed through the hierarchy. C. enhances the usefulness of information received. D. decreases an organization's response time to changing market conditions. E. has become more popular due to technological advancements.

Business