If variable costs cannot be reduced, how much reduction in fixed costs will be needed to achieve the profit target?
Electron Manufacturing is a price-taker. Electron produces large spools of electrical wire in a highly competitive market; thus, the company uses target pricing. The current market price of the electric wire is $780 per unit. The company has $3,200,000 in average assets, and the desired profit is a return of 4% on assets. Assume all products produced are sold. The company provides the following information:
A) $7,128,000
B) $13,000,000
C) $7,000,000
D) $13,128,000
A) $7,128,000
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