Rica Company is a price-taker and uses a target-pricing approach.Refer to the following information: $$\begin{array} { | l | c | l|}
\hline \text { Production volume } & 600,000 &\text { units per year } \
\hline \text { Market price } & \$ 30& \text { per unit } \
\hline \text { Desired operating income } & 17 \%& \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 \
\hline
\end{array}$$ What is the desired profit for the year?

Question

Rica Company is a price-taker and uses a target-pricing approach.Refer to the following information: $$\begin{array} { | l | c | l|} 
\hline \text { Production volume } & 600,000 &\text { units per year } \
\hline \text { Market price } & \$ 30& \text { per unit } \
\hline \text { Desired operating income } & 17 \%& \text { of total assets } \
\hline \text { Total assets } & \$ 13,900,000 \
\hline
\end{array}$$ What is the desired profit for the year?

Quizplus · Accepted Answer

The desired profit is calculated as 17% of total assets: 0.17 * $13,900,000 = $2,363,000.

Rica Company Is a Price-Taker and Uses a Target-Pricing Approach