Sweet -o- licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Sweet - o - licious makes a variety of candy, the cost differenc insignificant, and the cases all sell for the same price. Sweet -o– licious has a total capital investment of $11,000,000. It expects to produce and sell 700,000 cases of candy next Sweet - o- licious requires a 10% target return on investment. Expected costs for next year are as follows: E (Click the icon to view the costs.) Sweet -o- licious prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Requirement 1. What is the target operating income? (Enter the percentage as a whole number.) Capital investment Target return on investment Target operating income X $ 11,000,000 10 % $ 1,100,000 Requirement 2. What is the selling price Sweet - o - licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost. Begin by calculating the target revenues by working backwards from the target operating income. Target revenues Data table Variable costs Contribution margin Variable production costs $5.50 per case Fixed costs Variable marketing and distribution costs $5.00 per case Target operating income Fixed production costs $1,350,000 Fixed marketing and distribution costs $400,000 Other fixed costs $300,000 Requirements 1. What is the target operating income? 2. What is the selling price Sweet - o - licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Sweet -o- licious's closest competitor has just increased its candy case price to $17, although it sells 36 candy bars per case. Sweet - o - licious is considering increasing its selling price to $16 per case. Assuming production and sales decrease by 3%, calculate Sweet -o- licious' return on investment. Is increasing the selling price a good idea? Print Done
Sweet -o- licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Sweet - o - licious makes a variety of candy, the cost differenc insignificant, and the cases all sell for the same price. Sweet -o– licious has a total capital investment of $11,000,000. It expects to produce and sell 700,000 cases of candy next Sweet - o- licious requires a 10% target return on investment. Expected costs for next year are as follows: E (Click the icon to view the costs.) Sweet -o- licious prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Requirement 1. What is the target operating income? (Enter the percentage as a whole number.) Capital investment Target return on investment Target operating income X $ 11,000,000 10 % $ 1,100,000 Requirement 2. What is the selling price Sweet - o - licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost. Begin by calculating the target revenues by working backwards from the target operating income. Target revenues Data table Variable costs Contribution margin Variable production costs $5.50 per case Fixed costs Variable marketing and distribution costs $5.00 per case Target operating income Fixed production costs $1,350,000 Fixed marketing and distribution costs $400,000 Other fixed costs $300,000 Requirements 1. What is the target operating income? 2. What is the selling price Sweet - o - licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Sweet -o- licious's closest competitor has just increased its candy case price to $17, although it sells 36 candy bars per case. Sweet - o - licious is considering increasing its selling price to $16 per case. Assuming production and sales decrease by 3%, calculate Sweet -o- licious' return on investment. Is increasing the selling price a good idea? Print Done
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Sweet - o- licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Sweet - o- licious makes a variety of candy, the cost differences are
insignificant, and the cases all sell for the same price. Sweet - o- licious has a total capital investment of $11,000,000. It expects to produce and sell 700,000 cases of candy next year.
Sweet - o- licious requires a 10% target return on investment. Expected costs for next year are as follows:
E (Click the icon to view the costs.)
Sweet - o- licious prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital.
Read the requirements.
Requirement 1. What is the target operating income? (Enter the percentage as a whole number.)
Capital investment
Target return on investment
Target operating income
2$
11,000,000
10 %
2$
1,100,000
Requirement 2. What is the selling price Sweet - o- licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost.
Begin by calculating the target revenues by working backwards from the target operating income.
Target revenues
Data table
Variable costs
Contribution margin
Variable production costs
$5.50 per case
Fixed costs
Variable marketing and distribution costs
$5.00 per case
Target operating income
Fixed production costs
$1,350,000
Fixed marketing and distribution costs
$400,000
Other fixed costs
$300,000
Requirements
1. What is the target operating income?
2. What is the selling price Sweet - o- licious needs to charge to earn the target operating
income? Calculate the markup percentage on full cost.
Print
Done
3. Sweet - o– licious's closest competitor has just increased its candy case price to $17,
although it sells 36 candy bars per case. Sweet - o- licious is considering increasing its
selling price to $16 per case. Assuming production and sales decrease by 3%, calculate
Sweet - o- licious' return on investment. Is increasing the selling price a good idea?
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