Origami Company is a price-taker and uses target pricing. Please refer to the following information:...
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Accounting
Origami Company is a price-taker and uses target pricing. Please refer to the following information:
Production volume
500,000
Units per year
Market price
$24.00
Per unit
Desired operating profit
12%
Of total assets
Total assets
$12,500,000
Variable cost per unit
$17.00
Per unit
Fixed cost per year
$3,000,000
Per year
With the current cost structure, Origami 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, how much will the target variable costs per unit be? (Please round to nearest cent.)
A) $14.67 B) $16.25 C) $15.00 D) $17.50
Polynesian Products sells 1,800 kayaks per year at a price of $480 per unit. Polynesian sells in a highly competitive market and uses target pricing. The company has calculated its
target full cost at $729,000 per year. Total variable costs are $396,000 per year and cannot be reduced. How much are the target fixed costs?
A) $265,000 B) $410,000 C) $396,000 D) $333,000
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