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Question - Origami Company is a price-taker and uses target pricing. Please refer to the following information:
Production volume 500,000 Units per year
Market price $24.00 Per unit
Desired operating profit 12% Of total assets
Total assets $12,500,000
Variable cost per unit $17.00 Per unit
Fixed cost per year $3,000,000 Per year
With the current cost structure, Origami 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, how much will the target variable costs per unit be?
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