Fowler Company Is a Price-Taker and Uses Target Pricing With the Current Cost Structure,Fowler Cannot Achieve Its Profit Goals

question 160

Multiple Choice

Fowler Company is a price-taker and uses target pricing.Refer to the following information: $\begin{array}{|l|r|l|}\hline \text { Production volume } & 601,000 & \text { units per year } \\\hline \text { Market price } & \$ 30 & \text { per unit } \\\hline \text { Desired operating income } & 17 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,800,000 & \\\hline \text { Variable cost per unit } & \$ 18 & \text { per unit } \\\hline \text { Fixed cost per year } & \$ 5,500,000 & \text { per year }\\\hline\end{array}$ With the current cost structure,Fowler cannot achieve its profit goals.It will have to reduce either the fixed costs or the variable costs.Assuming that variable costs cannot be reduced,what are the target fixed costs per year? Assume all units produced are sold.

• A)$4,866,000
• B)$5,500,000
• C)$12,530,000
• D)$10,818,000

---

Definitions:

Federal Trade Commission

A U.S. federal agency tasked with protecting consumers and promoting competition, enforcing antitrust and consumer protection laws.

Polypore

A type of fungus with pores or tubes on the underside, which releases spores.

Microporous Products

Products designed with very small pores that allow for filtration, absorption, or other interactions with particles and fluids at the microscopic level.

Competition

The activity or condition of striving to gain or win something by defeating or establishing superiority over others.