Meson Production Is a Price-Taker

question 137

Multiple Choice

Meson Production is a price-taker. It produces large spools of electrical wire in a highly competitive market, so it practices target pricing. The current market price of the electric wire is $780 per unit. The company has $3,000,000 in assets and its shareholders expect a return of 6% on assets. The company provides the following information: If variable costs cannot be reduced, how much reduction in fixed costs will be needed to achieve the profit target?

• A)$4,180,000
• B)$12,000,000
• C)$7,820,000
• D)$4,200,000

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Definitions:

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