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Ortiz Company is a price-taker and uses target pricing. Refer to the following information: Production volume 602,000 units per year Market price $30 per unit

Ortiz Company is a price-taker and uses target pricing. Refer to the following information:

Production volume

602,000

units per year

Market price

$30

per unit

Desired operating income

17%

of total assets

Total assets

$13,800,000

Variable cost per unit

$20

per unit

Fixed cost per year

$5,600,000

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.

A) $10,114,000

B) $12,040,000

C) $5,600,000

D) $15,714,000

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