E16.8 (LO 4), AN We Got Game Inc. has been producing basketballs, volleyballs, soccer balls, and footballs for many years. Its manager, Jake, just came up with the idea to sell products in a bundle to provide more options for buyers. Jake's suggestion is to sell a bundle of balls (one of each of the four types listed, above) for $55. This already represents a savings to the consumer of 15% off regular, individual prices for the items. The company has been operating within its target cost for all of these products, which combined total $35 per bundle. The proposal includes a target sales volume of 10,000 bundles. Required a. If We Got Game requires an ROI of 20% on its invested assets, what amount of invested assets must the company currently have? b. If We Got Game recognizes that it will need to invest in at least two new pieces of equipment (at a total cost of $125,000) in the coming year to facilitate this bundling process, what will be the new target cost per unit? c. If We Got Game finds that it has to drop its target selling price to $50 to really promote this bundle, what ROI would this scenario provide the company, incorporating the new target cost per unit from part (b)?
E16.8 (LO 4), AN We Got Game Inc. has been producing basketballs, volleyballs, soccer balls, and footballs for many years. Its manager, Jake, just came up with the idea to sell products in a bundle to provide more options for buyers. Jake's suggestion is to sell a bundle of balls (one of each of the four types listed, above) for $55. This already represents a savings to the consumer of 15% off regular, individual prices for the items. The company has been operating within its target cost for all of these products, which combined total $35 per bundle. The proposal includes a target sales volume of 10,000 bundles. Required a. If We Got Game requires an ROI of 20% on its invested assets, what amount of invested assets must the company currently have? b. If We Got Game recognizes that it will need to invest in at least two new pieces of equipment (at a total cost of $125,000) in the coming year to facilitate this bundling process, what will be the new target cost per unit? c. If We Got Game finds that it has to drop its target selling price to $50 to really promote this bundle, what ROI would this scenario provide the company, incorporating the new target cost per unit from part (b)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:E16.8 (LO 4), AN We Got Game Inc. has been producing basketballs, volleyballs, soccer balls, and footballs for
many years. Its manager, Jake, just came up with the idea to sell products in a bundle to provide more options
for buyers. Jake's suggestion is to sell a bundle of balls (one of each of the four types listed, above) for $55. This
already represents a savings to the consumer of 15% off regular, individual prices for the items. The company
has been operating within its target cost for all of these products, which combined total $35 per bundle. The
proposal includes a target sales volume of 10,000 bundles.
Required
a. If We Got Game requires an ROI of 20% on its invested assets, what amount of invested assets must the
company currently have?
b. If We Got Game recognizes that it will need to invest in at least two new pieces of equipment (at a total
cost of $125,000) in the coming year to facilitate this bundling process, what will be the new target cost per
unit?
c. If We Got Game finds that it has to drop its target selling price to $50 to really promote this bundle, what
ROI would this scenario provide the company, incorporating the new target cost per unit from part (b)?
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