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Origami Company is a price-taker and uses target pricing. Please refer to the following information: Production volume 500,000 Units per year Market price $24.00 Per
- Origami Company is a price-taker and uses target pricing. Please refer to the following information:
Production volume
500,000
Units per year
Market price
$24.00
Per unit
Desired operating profit
12%
Of total assets
Total assets
$12,500,000
Variable cost per unit
$17.00
Per unit
Fixed cost per year
$3,000,000
Per year
Production volume | 500,000 | Units per year |
Market price | $24.00 | Per unit |
Desired operating profit | 12% | Of total assets |
Total assets | $12,500,000 | |
Variable cost per unit | $17.00 | Per unit |
Fixed cost per year | $3,000,000 | Per year |
With the current cost structure, Origami 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, how much will the target variable costs per unit be? (Please round to nearest cent.)
A) $14.67 B) $16.25 C) $15.00 D) $17.50
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