Wheeler Company is a price-taker and uses a target-pricing approach. Refer to the following information: $$\begin{array} { | l | r | l | }
\hline \text { Production volume } & 600,000 & \text { units per year } \
\hline \text { Market price } & \$ 32 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,700,000 & \
\hline
\end{array}$$ What is the desired profit for the year?

Question

Wheeler Company is a price-taker and uses a target-pricing approach. Refer to the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Production volume } & 600,000 & \text { units per year } \
\hline \text { Market price } & \$ 32 & \text { per unit } \
\hline \text { Desired operating income } & 17 \% & \text { of total assets } \
\hline \text { Total assets } & \$ 13,700,000 & \
\hline
\end{array}$$ What is the desired profit for the year?

Quizplus · Accepted Answer

The desired profit for the year is calculated as 17% of total assets, which is 17% of $13,700,000 = $2,329,000.

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