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

question 140

Multiple Choice

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

• A) $14.67
• B) $16.25
• C) $15.00
• D) $17.50

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Definitions:

Marginal Changes

Marginal changes describe small adjustments to a variable's quantity or level, analyzing the effects of these adjustments on an overall system.

Status Quo

The existing state or condition of affairs, often used in the context of maintaining current circumstances without change.

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The act of creating, organizing, and running a new business venture to take advantage of market opportunities, often involving risk and innovation.

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