Meson Production Is a Price-Taker If Fixed Costs Cannot Be Reduced,how Much Reduction in Variable

question 18

Multiple Choice

Meson Production is a price-taker.It produces large spools of electrical wire in a highly competitive market,so it practises target pricing.The current market price of the electric wire is $800 per unit.The company has $3,100,000 in assets and its shareholders expect a return of 9% on assets.The company provides the following information:
$$\begin{array} { | l | l | l | } \hline \text { Sales volume } & 120,000 & \text { units per year } \\\hline \text { Variable costs } & \$ 730 & \text { per unit } \\\hline \text { Fixed costs } & \$ 14,000,000 & \text { per year } \\\hline\end{array}$$
If fixed costs cannot be reduced,how much reduction in variable costs will be needed to achieve the profit target?

• A) $279,000
• B) $5,879,000
• C) $14,000,000
• D) $87,600,000

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Definitions:

Structures

The arranged and organized systems or frameworks within an organization that determine the manner in which activities are coordinated and directed.

Human Relations

The study and practice of improving interpersonal relationships, especially in a workplace setting, to enhance productivity and job satisfaction among employees.

Organic

Referring to or derived from living matter; in business, it describes growth or processes that occur in a natural, gradual, and continuous manner.

Theorists

Individuals who formulate theories or concepts in a particular field of study or aspect of human behavior.