Kerr Productions Is a Price-Taker

question 126

Multiple Choice

Kerr Productions 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 is $800 per unit.The company has $3,000,000 in average assets,and the desired profit is a return of 8% on assets.Assume all products produced are sold.The company provides the following information:

Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs.If fixed costs cannot be reduced,how much reduction in variable cost per unit will be needed to achieve the desired target? (Round your answer to the nearest cent. )

• A)reduction in variable cost per unit by $725.00
• B)reduction in variable cost per unit by $75.00
• C)reduction in variable cost per unit by $65.00
• D)reduction in variable cost per unit by $67.40

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Definitions:

Economic Indicators

Statistics about economic activities that allow analysis of economic performance and predictions of future performance.

Structural Unemployment

A type of unemployment that results from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

Skills Mismatch

A discrepancy between the skills offered by labor market participants and the skills demanded by employers.

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The number of job positions that are currently unfilled and available to be applied for by job seekers.