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

question 136

Multiple Choice

Fowler Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | l | l | } \hline \text { Production volume } & \$ 00,000 & \text { units per year } \\\hline \text { Market price } & \$ 30 & \text { per unit } \\\hline \text { Desired operating income } & 17 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,700,000 & \\\hline \text { Variable cost per unit } & \$ 17 & \text { per unit } \\\hline \text { Fixed cost per year } & \$ 5,600,000 & \text { per year } \\\hline\end{array}$$ With the current cost structure,Fowler cannot achieve its profit goals.It will have to reduce either the fixed costs or the variable costs.Assuming that variable costs cannot be reduced,what are the target fixed costs per year? Assume all units produced are sold.

• A) $5,471,000
• B) $5,600,000
• C) $12,400,000
• D) $10,200,000

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Definitions:

Upper Middle Class

A socioeconomic group that is above the middle class, often characterized by higher education, professional employment, and above-average income.

Lorenz Curve

A graphical representation of income or wealth distribution within a population, often used to illustrate economic inequality.

Distribution Of Income

How a nation’s total earnings are spread among its population, impacting wealth inequality.

Wealth

Anything that has value because it produces income or could produce income.