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Nature Place operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Nature Place has $5,000,000 in assets. Its yearly fixed costs are $625,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.70. Nature Place's volume is currently 510,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.00 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Read the requirements. Requirement 1. Nature Place's owners want to earn an 11% return on investment on the company's assets. What is Nature Place's target full product cost? Less: Target full product cost Requirement 2. Given Nature Place's current costs, will its owners be able to achieve their target profit? Begin by calculating Nature Place's current full product cost. Plus: Current full product cost Nature Place's current full product costs are its target full product cost, therefore Nature Place be able to acheive its target profit. Requirement 3. Assume Nature Place has identified ways to cut its variable costs to $1.55 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Begin by calculating Nature Place's new target fixed cost. Less: Target fixed cost Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are measures the new target fixed cost amount, Nature Place be able to achieve its target profit without having to take any other cost cutting

Nature Place operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Nature Place has $5,000,000 in assets. Its yearly fixed costs are $625,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.70. Nature Place's volume is currently 510,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.00 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Read the requirements. Requirement 1. Nature Place's owners want to earn an 11% return on investment on the company's assets. What is Nature Place's target full product cost? Less: Target full product cost Requirement 2. Given Nature Place's current costs, will its owners be able to achieve their target profit? Begin by calculating Nature Place's current full product cost. Plus: Current full product cost Nature Place's current full product costs are its target full product cost, therefore Nature Place be able to acheive its target profit. Requirement 3. Assume Nature Place has identified ways to cut its variable costs to $1.55 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Begin by calculating Nature Place's new target fixed cost. Less: Target fixed cost Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are measures the new target fixed cost amount, Nature Place be able to achieve its target profit without having to take any other cost cutting

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Requirement 4. Nature Place started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Nature Place does not expect volume to be affected, but it hopes to gain more control over pricing. If Nature Place has to spend $105,000 this year to advertise and its variable costs continue to be $1.55 per unit, what will its cost-plus price be? Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.) Plus: Full product cost Plus: Target revenue Divided by: Cost-plus price per unit Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? If the advertising campaign is effective, Nature Place charged. be able to sell its plants to garden centers at this price because it is than the $4.00 that Nature Place previously
Transcribed Image Text:Requirement 4. Nature Place started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Nature Place does not expect volume to be affected, but it hopes to gain more control over pricing. If Nature Place has to spend $105,000 this year to advertise and its variable costs continue to be $1.55 per unit, what will its cost-plus price be? Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.) Plus: Full product cost Plus: Target revenue Divided by: Cost-plus price per unit Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? If the advertising campaign is effective, Nature Place charged. be able to sell its plants to garden centers at this price because it is than the $4.00 that Nature Place previously
Nature Place operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Nature Place has $5,000,000 in assets. Its yearly fixed costs are $625,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.70. Nature Place's volume is currently 510,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.00 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Read the requirements. Requirement 1. Nature Place's owners want to earn an 11% return on investment on the company's assets. What is Nature Place's target full product cost? Less: Target full product cost Requirement 2. Given Nature Place's current costs, will its owners be able to achieve their target profit? Begin by calculating Nature Place's current full product cost. Plus: Current full product cost Nature Place's current full product costs are its target full product cost, therefore Nature Place be able to acheive its target profit. Requirement 3. Assume Nature Place has identified ways to cut its variable costs to $1.55 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Begin by calculating Nature Place's new target fixed cost. Less: Target fixed cost Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are measures. the new target fixed cost amount, Nature Place be able to achieve its target profit without having to take any other cost cutting Requirement 4. Nature Place started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Nature Place does not expect volume to be affected, but it hopes to gain more control over pricing. If Nature Place has to spend $105,000 this year to advertise and its variable costs continue to be $1.55 per unit, what will its cost-plus price be? Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.)
Transcribed Image Text:Nature Place operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Nature Place has $5,000,000 in assets. Its yearly fixed costs are $625,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-size plant total $1.70. Nature Place's volume is currently 510,000 units. Competitors offer the same plants, at the same quality, to garden centers for $4.00 each. Garden centers then mark them up to sell to the public for $9 to $12, depending on the type of plant. Read the requirements. Requirement 1. Nature Place's owners want to earn an 11% return on investment on the company's assets. What is Nature Place's target full product cost? Less: Target full product cost Requirement 2. Given Nature Place's current costs, will its owners be able to achieve their target profit? Begin by calculating Nature Place's current full product cost. Plus: Current full product cost Nature Place's current full product costs are its target full product cost, therefore Nature Place be able to acheive its target profit. Requirement 3. Assume Nature Place has identified ways to cut its variable costs to $1.55 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Begin by calculating Nature Place's new target fixed cost. Less: Target fixed cost Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are measures. the new target fixed cost amount, Nature Place be able to achieve its target profit without having to take any other cost cutting Requirement 4. Nature Place started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Nature Place does not expect volume to be affected, but it hopes to gain more control over pricing. If Nature Place has to spend $105,000 this year to advertise and its variable costs continue to be $1.55 per unit, what will its cost-plus price be? Do you think Nature Place will be able to sell its plants to garden centers at the cost-plus price? Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.)
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