Ignite Products Is a Price-Taker

question 187

Multiple Choice

Ignite Products is a price-taker.The company produces large spools of electrical wire in a highly competitive market;thus,it uses target pricing.The current market price of the electric wire is $800 per unit.The company has $3,100,000 in average assets,and the desired profit is a return of 7% on assets.Assume all products produced are sold.The company provides the following information:

If fixed costs cannot be reduced,how much reduction in variable costs will be needed to achieve the desired target?

• A)$217,000
• B)$13,000,000
• C)$5,217,000
• D)$72,000,000