TinRoof, Inc., manufa Required: 1. What was TinRoo What was the perc 2. TinRoof is conside the investment wil. your calculations. 3. Refer back to the o calculated in requir wants to maintain a

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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TinRoof, Inc., manufactures and sells a do-it-yourself storage shed kit. In 2013, it reported the following:
Units produced and sold
3,200
Investment
S2,400,000
Markup percentage on full cost
8%
Rate of return on investment
12%
Variable cost per unit
S500
Required:
1. What was TinRoof's operating income in 2013? What was the full cost per unit? What was the selling price?
What was the percentage markup on variable cost?
2. TinRoof is considering increasing the annual spending on advertising by $175,000. The managers believe that
the investment will translate into a 10% increase in unit sales. Should the company make the investment? Show
your calculations.
3. Refer back to the original data. In 2014, TinRoof believes that it will only be able to sell 2,900 units at the price
calculated in requirement 1. Management has identified $125,000 in fixed cost that can be eliminated. If TinRoof
wants to maintain an 8% markup on full cost, what is the target variable cost per unit?
Transcribed Image Text:TinRoof, Inc., manufactures and sells a do-it-yourself storage shed kit. In 2013, it reported the following: Units produced and sold 3,200 Investment S2,400,000 Markup percentage on full cost 8% Rate of return on investment 12% Variable cost per unit S500 Required: 1. What was TinRoof's operating income in 2013? What was the full cost per unit? What was the selling price? What was the percentage markup on variable cost? 2. TinRoof is considering increasing the annual spending on advertising by $175,000. The managers believe that the investment will translate into a 10% increase in unit sales. Should the company make the investment? Show your calculations. 3. Refer back to the original data. In 2014, TinRoof believes that it will only be able to sell 2,900 units at the price calculated in requirement 1. Management has identified $125,000 in fixed cost that can be eliminated. If TinRoof wants to maintain an 8% markup on full cost, what is the target variable cost per unit?
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