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Trina Productions is a​ price-taker. The company produces large spools of electrical wire in a highly competitive​ market; thus, it uses target pricing. The current market price of the electric wire is

$ 800

per unit. The company has

$3,000,000

in average​ assets, and the desired profit is a return of

8​%

on assets. Assume all products produced are sold. The company provides the following​ information:

Sales volume

100,000

units per year

Variable costs

$710

per unit

Fixed costs

$12,000,000

per year

If fixed costs cannot be​ reduced, how much reduction in variable costs will be needed to achieve the desired​ target?

Answer
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