Dell 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 is $825 per unit. The company has $3,100,000 in average assets, and the desired profit is a return of 6% on assets. Assume all products produced are sold. The company provides the following information:

Sales volume 100,000 units per year
Variable costs $700 per unit
Fixed costs $13,000,000 per year

Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost per unit will be needed to achieve the desired target? (Round your answer to the nearest cent.)
A) reduction in variable cost per unit by $700.00
B) reduction in variable cost per unit by $125.00
C) reduction in variable cost per unit by $5.00
D) reduction in variable cost per unit by $6.86

D .D)
Variable costs ($700 per unit) $70,000,000
Fixed costs 13,000,000
Total costs $83,000,000

Total sales ($825 per unit) $82,500,000
Less: Target profit ($3,100,000 x 6%) 186,000
Target cost $82,314,000

Variable costs per unit must be reduced by $6.86 per unit ($686,000 / 100,000 units; $686,000 = $83,000,000 - $82,314,000 ) to achieve the profit target.