Question

Homework: Chapter 3 - Pricing Decisions Homework Save Score: 2.66 of 5 pts 3 of 4 (2 complete) HW Score: 25.84%, 3.62 of 14 pts P13-26 (similar to) B Question Help The new CEO of Rafferty Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: (Click the icon to view the variety of operations information.) Read the requirements. Variable costs 1.150.000 $ 4,620,000 Sales revenue (Round your answer to the nearest cent.) (b) The selling price per unit is $ 9.24 (c) Calculate the rate of return on investment. Determine the formula you will use and then enter the amounts. (Round the return on investment to the nearest whole percentage.) ( Operating income / Total investment ) = Return on investment ( $ 220,000 $ 2,750,000 ) = 8 % (d) Calculate the markup percentage on full cost for this product. Determine the formula you will use and then enter the amounts. (Enter the per unit amounts to the nearest cent. Enter the markup as a percentage rounded to two decimals.) Markup per unit 1 Full cost per unit ) = Markup on full costs [% Enter any number in the edit fields and then click Check Answer. A parts 4 remaining Clear All Check Answer ►

Answer 1

1.Total Sales Revenue = Operating Income + Variable costs + Fixed costs

= 220,000+500,000*2.30 + 3,250,000

= $4,620,000

Selling price = Sales/Units

= 4,620,000/500,000

= $9.24 per unit

Rate of return on Investment = Operating income/Investment

= 220,000/2750,000

= 8%

Mark up on cost = Mark up per unit/Full cost per unit

Mark up per unit = 220,000/500,000 = 0.44

Full cost = 2.30 + 3250,000/500,000 = 8.8

Mark up % = 0.44/8.8 = 5%

2.Full cost = (2.3 – 0.25)+2,975,000/500,000 = $8

Mark up = 8*5% = $0.4

Selling price = $8.4 per unit

3.Operating Income = (8.4-2.05)*450,000 – 2,975000

= -$117,500 i.e. loss

4.Mark up per unit declines

Any reduction in sales unit will lead to larger losses as the fixed costs will not reduce