Meson Productions Is a Price-Taker If Variable Costs Cannot Be Reduced,how Much Reduction in Fixed

question 101

Multiple Choice

Meson Productions is a price-taker.Meson produces large spools of electrical wire in a highly competitive market; thus,the company uses target pricing.The current market price of the electric wire is $770 per unit.The company has $3,100,000 in average assets,and the desired profit is a return of 4% on assets.Assume all products produced are sold.The company provides the following information: $$\begin{array} { | l | r | l | } \hline \text { Sales volume } & 110,000& \text { units per year } \\\hline \text { Variable costs } & \$ 680 & \text { per unit } \\\hline \text { Fixed costs } & \$ 14,000,000 & \text { per year } \\\hline\end{array}$$ If variable costs cannot be reduced,how much reduction in fixed costs will be needed to achieve the profit target?

• A)$4,224,000
• B)$14,000,000
• C)$4,100,000
• D)$14,124,000

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