Ignite Products Is a Price-Taker If Fixed Costs Cannot Be Reduced,how Much Reduction in Variable

question 191

Multiple Choice

Ignite Products is a price-taker.The company produces large spools of electrical wire in a highly competitive market; thus,it uses target pricing.The current market price of the electric wire is $700 per unit.The company has $3,000,000 in average assets,and the desired profit is a return of 8% on assets.Assume all products produced are sold.The company provides the following information: $$\begin{array} { | l | l | l | } \hline \text { Sales volume } & 120,000 & \text { units per year } \\\hline \text { Variable costs } & \$ 660 & \text { per unit } \\\hline \text { Fixed costs } & \$ 14,000,000 & \text { per year } \\\hline\end{array}$$ If fixed costs cannot be reduced,how much reduction in variable costs will be needed to achieve the desired target?

• A) $240,000
• B) $14,000,000
• C) $9,440,000
• D) $79,200,000

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Definitions:

Anticoagulant Medication

Drugs that help prevent blood clots from forming, reducing the risk of stroke and heart attack.

Venous Obstruction

Venous obstruction is a condition where flow through the veins is impeded, leading to swelling and other symptoms.

Partial Blockage

A partial blockage refers to an obstruction that partially impedes flow within a tube or passageway in the body, such as an artery or intestine.

Claudication

Pain or cramping in the lower leg due to inadequate blood flow to the muscles, typically induced by exercise and relieved with rest.