Meson Productions is a price taker. Meson produces large spools of electrical wire in a highly competitive market; thus, the company uses target pricing. The current market price of the electric wire is $770 per unit. The company has $3,000,000 in average assets, and the desired profit is a return of 5% on assets. Assume all products produced are sold. The company provides the following information: Sales volume 110,000 units per year
Variable costs $660 per unit
Fixed costs $14,000,000 per year
If variable costs cannot be reduced, how much reduction in fixed costs will be needed to achieve the profit target?
A. $7,750,000
B. $7,600,000
C. $12,150,000
D. $12,000,000

Instructions are below

Explanation:

Giving the following information:

The current market price of the electric wire is $770 per unit.

The company has $3,000,000 in average assets, and the desired profit is a return of 5% on assets.

Sales volume 110,000 units per year

Variable costs $660 per unit

Fixed costs $14,000,000 per year

The company's objective is 5% of average assets. In this case, $150,000.

Total contribution margin= 110,000*110= 12,100,000

Fixed costs= (14,000,000)

Net operating profit= (1,900,000)

Target profit= 150,000

Target fixed costs= Contribution margin - target profit

Target fixed costs= 12,100,000 - 150,000= 11,950,000

Prove:

Total contribution margin= 110,000*110= 12,100,000

Fixed costs= (11,950,000)

Net operating profit= 150,000

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

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