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:

Equal Outcomes

Describes a scenario where all participants or entities achieve the same results, regardless of differences in effort, skill, or starting conditions.

Distributive Justice

The perceived fairness of the distribution of resources or rewards among individuals in a group or organization.

Paid Disproportionately

A situation where compensation does not match the effort, skill level, or responsibility held.

Work-Family Conflict

A form of tension occurring when the demands of work and family roles are incompatible in some respect.