Question

Rica Company is a priceminustaker and uses a targetminuspricing approach. Refer to the following​ information: Production volume 602 comma 000 units per year Market price $ 30 per unit Desired operating income 16​% of total assets Total assets $ 13 comma 900 comma 000 What is the desired profit for the​ year?

Answer 1

Answer:

$ 15,836,000

Explanation:

Given:

Production volume = 602,000 units

Market Price per unit = $ 30

Desired operating income = 16% of the total assets

Total assets = $ 13,900,000

Thus,

Desired operating income = 0.16 × $ 13,900,000 = $ 2,224,000

Now,

the desired profit = Total sales - Total income

or

Desired profit = (Production volume × Market Price per unit ) - Total income

on substituting the respective values, we have

Desired profit = (602,000 × $ 30) -  $ 2,224,000

or

Desired profit = $ 18,060,000 - $ 2,224,000

or

Desired profit = $ 15,836,000