Electron Manufacturing Is a Price-Taker If Variable Costs Cannot Be Reduced,how Much Reduction in Fixed

Electron Manufacturing is a price-taker.Electron 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 $780 per unit.The company has $3,200,000 in average assets,and the desired profit is a return of 4% on assets.Assume all products produced are sold.The company provides the following information: $$\begin{array} { | l | l | l | } \hline \text { Sales volume } & 100,000 & \text { units per year } \\\hline \text { Variable costs } & \$ 720 & \text { per unit } \\\hline \text { Fixed costs } & \$ 13,000,000 & \text { per year } \\\hline\end{array}$$ If variable costs cannot be reduced,how much reduction in fixed costs will be needed to achieve the profit target?

A) $7,128,000
B) $13,000,000
C) $7,000,000
D) $13,128,000

Correct Answer:

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