Murphy Productions Is a Price-Taker

question 95

Essay

Murphy Productions 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:

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:

Having the Flu

Experiencing symptoms of influenza, a contagious respiratory illness caused by influenza viruses.

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The process of attributing causes to someone's behavior based on their personality, characteristics, or disposition.

Situational Attribution

The process of explaining the behavior of others based on external factors, such as the situation or environment, rather than on internal characteristics.

Temporary

Occurring for a limited time period; not permanent.