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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

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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 2 years ago
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