Modern Garden operates a commercial nursery where it grows plants for garden centers throughout the region. Modern Garden has $8,000,000 in assets. Its yearly fixed costs are $2,000,000 and the variable costs for the potting soil, container, label, seedling, and labor for each gallon size plant total $3.00. Modern Garden's volume is currently 1,000,000 units. Modern Garden offers the plants to garden centers for $6.00 each. Garden centers then mark them up to sell to the public for $12 to $15, depending on the type of plant. Required: a) Modern Garden's owners want to earn a 20% return on the company's assets. What is Modern Garden's target profit? b) Given Modern Garden's current costs, will its owners be able to achieve their target profit? c) If Modern Garden raises its price by $1.00 per unit, sales would be 900,000 units. Modern Garden will use Kaizen budgeting to reduce variable costs by 30 cents. If these changes are made, can Modern Garden achieve its target income?

Modern Garden operates a commercial nursery where it grows plants for garden centers throughout the region. Modern Garden has $8,000,000 in assets. Its yearly fixed costs are $2,000,000 and the variable costs for the potting soil, container, label, seedling, and labor for each gallon size plant total $3.00. Modern Garden's volume is currently 1,000,000 units. Modern Garden offers the plants to garden centers for $6.00 each. Garden centers then mark them up to sell to the public for $12 to $15, depending on the type of plant. Required: a) Modern Garden's owners want to earn a 20% return on the company's assets. What is Modern Garden's target profit? b) Given Modern Garden's current costs, will its owners be able to achieve their target profit? c) If Modern Garden raises its price by $1.00 per unit, sales would be 900,000 units. Modern Garden will use Kaizen budgeting to reduce variable costs by 30 cents. If these changes are made, can Modern Garden achieve its target income?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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