Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Kerr 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

image text in transcribed

Kerr 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 is $800 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 Variable costs Fixed costs 110,000 units per year $725 per unit $12,000,000 per year Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost per unit will be needed to achieve the desired target? (Round your answer to the nearest cent.) O A. reduction in variable cost per unit by $725.00 O B. reduction in variable cost per unit by $75.00 O C. reduction in variable cost per unit by $34.09 OD. reduction in variable cost per unit by $36.55

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Financial Reporting

Authors: Alan Melville

7th Edition

1292293128, 9781292293127

More Books

Students also viewed these Accounting questions

Question

Describe recruitment and selection for international operations.

Answered: 1 week ago