Wheeler Company Is a Price-Taker and Uses a Target-Pricing Approach

question 118

Multiple Choice

Wheeler Company is a price-taker and uses a target-pricing approach. Refer to the following information: $$\begin{array} { | l | r | l | } \hline \text { Production volume } & 600,000 & \text { units per year } \\\hline \text { Market price } & \$ 32 & \text { per unit } \\\hline \text { Desired operating income } & 17 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,700,000 & \\\hline\end{array}$$ What is the desired profit for the year?

• A) $102,000
• B) $19,200,000
• C) $5,500,000
• D) $2,329,000

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Definitions:

Estimated Future Returns

Projections or forecasts about the potential gains or incomes from investments over a future period.

Sales Discounts

A reduction in the price of goods or services offered to customers, usually to prompt early payment or reward bulk purchases.

Gross Price Method

Gross Price Method involves recording inventory at its gross price, before deducting any trade discounts or rebates.

Allowance for Doubtful Accounts

An accounting concept referring to an estimate of the amount of receivables that may not be collected, which is used to reduce the total accounts receivable reported on the balance sheet.