Biology Forums - Study Force

Cassa Company is a price-taker and uses target pricing. Refer to the following information:

Production volume   601,000    units per year
Market price   $32    per unit
Desired operating income   16%    of total assets
Total assets   $13,900,000   
Variable cost per unit   $20    per unit
Fixed cost per year   $5,400,000    per year

With the current cost structure, Cassa 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 year? Assume all units produced are sold.
A) $17,008,000
B) $5,400,000
C) $11,608,000
D) $12,020,000

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