Business, 18.06.2020 15:57 thomascoop85

Meson Productions is a price taker. Meson produces large spools of electrical wire in a highly competitive market; thus, the company uses target pricing. The current market price of the electric wire is $770 per unit. The company has $3,000,000 in average assets, and the desired profit is a return of 5% on assets. Assume all products produced are sold. The company provides the following information: Sales volume 110,000 units per year
Variable costs $660 per unit
Fixed costs $14,000,000 per year
If variable costs cannot be reduced, how much reduction in fixed costs will be needed to achieve the profit target?
A. $7,750,000
B. $7,600,000
C. $12,150,000
D. $12,000,000

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