Rica Company Is a Price-Taker and Uses Target Pricing

Multiple Choice

Rica Company is a price-taker and uses target pricing. Please refer to the following information: With the current cost structure, Rica 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 be the target variable costs per year?

A) $10,315,000
B) $5,115,000
C) $5,600,000
D) $5,200,000