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

question 105

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:

Charisma

A personal quality attributed to leaders who arouse fervent popular devotion and enthusiasm.

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Refers to inherent qualities or characteristics that distinguish effective leaders from others, including intelligence, confidence, charisma, and integrity.

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Leaders who inspire and motivate their followers to exceed their own interests for the good of the organization or society.

Bass

Referring to Bernard Bass, a prominent researcher in the field of leadership, particularly known for his work on transformational leadership.