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

question 99

Multiple Choice

Aguilar Company is a price-taker and uses target pricing.Refer to the following information: $\begin{array}{|l|r|l|}\hline \text { Production volume } & 600,000 & \text { units per year } \\\hline \text { Market price } & \$ 30 & \text { per unit } \\\hline \text { Desired operating income } & 15 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,800,000 & \\\hline \text { Variable cost per unit } & \$ 20 & \text { per unit } \\\hline \text { Fixed cost per year } & \$ 5,400,000 & \text { per year }\\\hline\end{array}$ With the current cost structure,Aguilar 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,what are the target variable costs per unit per year? Assume all units produced are sold.(Round your answer to the nearest cent.)

• A)$4.50
• B)$10.00
• C)$17.55
• D)$20.00

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Definitions:

Good-faith Purchaser

An individual who buys property without knowledge of any existing claims or faults of the property, thereby gaining full legal rights.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting its true economic worth.

Voidable

A legal status referring to a transaction or contract that may be rescinded or nullified at the discretion of one party due to certain defects or circumstances.

Stolen Merchandise

Goods that have been taken without permission or acquired illegally, often sold through unauthorized channels.