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In: Accounting
Cassa Company is a priceminustaker and uses target pricing. Refer to the following information: Production volume...
Cassa Company is a priceminustaker and uses target pricing. Refer to the following information: Production volume 601 comma 000 units per year Market price $ 30 per unit Desired operating income 15% of total assets Total assets $ 13 comma 900 comma 000 Variable cost per unit $ 19 per unit Fixed cost per year $ 5 comma 500 comma 000 per year With the current cost structure, Cassa 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. . $ 15 ,945, 000 B. $ 5, 500, 000 C. $ 10 ,445, 000 D. $ 11 ,419, 000
Solutions
Expert Solution
Calculate target variable cost per year
Target total cost = Target sale-Desired profit
= (601000*30)-(13900000*15%)
Target total cost = 18030000-2085000 = 15945000
Fixed cost = 15945000-5500000 = 10445000
So answer is c) $10445000
ekkarill92 answered 1 year agoRelated Solutions
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