Kerr Productions Is a Price-Taker Currently the Cost Structure Is Such That the Company Cannot

question 84

Multiple Choice

Kerr Productions 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 is $800 per unit.The company has $3,000,000 in average assets,and the desired profit is a return of 7% on assets.Assume all products produced are sold.The company provides the following information: $$\begin{array} { | l | r | l | } \hline \text { Sales volume } & 100,000 & \text { units per year } \\\hline \text { Variable costs } & \$ 725 & \text { per unit } \\\hline \text { Fixed costs } & \$ 12,000,000 & \text { per year } \\\hline\end{array}$$ Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs.If fixed costs cannot be reduced,how much reduction in variable cost per unit will be needed to achieve the desired target? (Round your answer to the nearest cent.)

• A) reduction in variable cost per unit by $725.00
• B) reduction in variable cost per unit by $75.00
• C) reduction in variable cost per unit by $45.00
• D) reduction in variable cost per unit by $47.10

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Definitions:

McDonaldization

The process by which the principles of the fast food industry have come to dominate other sectors of American society as well as other societies worldwide.

Culture-Ideology

The interconnectedness between the cultural practices and beliefs of a society and the underlying ideological principles that support them.

Means of Production

In Marxist theory, the physical, non-human inputs used for the production of economic value, such as factories, machines, and tools.

Cultural Differentialism

The perspective that cultures are distinct and unique, with significant differences that should be celebrated and preserved rather than assimilated.