Dynamo Company Is a Price-Taker Currently the Cost Structure Is Such That the Company Cannot

question 99

Essay

Dynamo Company is a price-taker.The company produces generators in a highly competitive market; thus,it uses target pricing.The current market price is $600 per unit.The company has $18,500,000 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:
$$\begin{array} { | l | r | l | } \hline \text { Sales volume } & 65,000& \text { units per year } \\\hline \text { Variable costs } & \$ 500 & \text { per unit } \\\hline \text { Fixed costs } & \$ 7,500,000 & \text { per year } \\\hline\end{array}$$ Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs.If variable costs cannot be reduced,how much reduction in fixed costs will be needed to achieve the desired target? Show all computations.

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Definitions:

Strong Cultures

The set of shared beliefs and values that strongly influence the behavior of individuals within an organization.

Subcultural Values

The unique values and norms shared by a subgroup within a larger society, often differing or opposing the dominant culture's values.

Bicultural Audit

An evaluation of an organization's ability to integrate and respect two or more cultural backgrounds within its operations or strategies.

Substantially Different

significantly varied or not alike in a meaningful or important way.