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

question 172

Multiple Choice

Aguilar Company is a price-taker and uses target pricing.Refer to the following information: $$\begin{array} { | l | l | l | } \hline \text { Production volume } & \$ 01,000 & \text { units per year } \\\hline \text { Market price } & \$ 30 & \text { per unit } \\\hline \text { Desired operating income } & 17 \% & \text { of total assets } \\\hline \text { Total assets } & \$ 13,800,000 & \\\hline \text { Variable cost per unit } & \$ 19 & \text { per unit } \\\hline \text { Fixed cost per year } & \$ 5,500,000 & \text { per year } \\\hline\end{array}$$ 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) $5.10
• B) $11.00
• C) $16.95
• D) $19.00

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Definitions:

Sample Statistics

Numerical data that describe characteristics of a sample, a subset of the population being studied.

Population Parameters

Statistical measures that describe characteristics of a population, such as the mean (average), median, mode, and standard deviation.

Precision

The consistency and repeatability of a measurement, or how close multiple measurements are to each other.

Correlation Coefficient

A statistical measure that indicates the extent to which two variables change together, ranging from -1.0 to +1.0.