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Origami Company Is a Price-Taker and Uses Target Pricing -
with the Current Cost Structure, Origami Cannot Achieve Its

question 65

Multiple Choice

Origami Company is a price-taker and uses target pricing. Please refer to the following information:
 Production volume 500,000 Units per year  Narket price $24.00 Per unit  Pesired aperating profit 12% Of total assets  Tatal assets $12,500,000 Varinble edst per unit $17.00 Per unit  Fixed cost per year $3,000,000 Per year \begin{array} { | l | r | r | } \hline \text { Production volume } & 500,000 & \text { Units per year } \\\hline \text { Narket price } & \$ 24.00 & \text { Per unit } \\\hline \text { Pesired aperating profit } & 12 \% & \text { Of total assets } \\\hline \text { Tatal assets } & \$ 12,500,000 & \\\hline \text { Varinble edst per unit } & \$ 17.00 & \text { Per unit } \\\hline \text { Fixed cost per year } & \$ 3,000,000 & \text { Per year } \\\hline\end{array}
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With the current cost structure, Origami 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, how much will the target variable costs per year be?


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