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:

Specific Performance

A legal remedy in contract law where a court orders a party to perform their obligations under a contract, rather than just paying damages for failure to do so.

Oral Agreement

A contract or agreement made through spoken words rather than in written form which can be legally binding in certain circumstances.

Part Performance

A legal principle that allows an incomplete contract to be enforced if one party has taken significant actions based on the agreement, demonstrating the existence of the contract.

Oral Promise

An agreement made verbally that may or may not be legally binding, depending on the context and content.