Rica Company is a price-taker and uses target pricing.Please refer to the following information:
- With the current cost structure,Rica 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 will be the target variable costs per year? Assume all units produced are sold.

Question

Rica Company is a price-taker and uses target pricing.Please refer to the following information: 
- With the current cost structure,Rica 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 will be the target variable costs per year? Assume all units produced are sold.

Quizplus · Accepted Answer

The target variable costs per year are $5,115,000. This is calculated by taking the total fixed costs of $10,315,000 and subtracting the desired profit of $5,200,000.

Rica Company Is a Price-Taker and Uses Target Pricing