Question

Garden House operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Garden House has $6.85 million in assets. Its yearly fixed costs are $584,000, and the variable costs for the potting soil, container, label, seedling, and labor for each gallon-sized plant total $1.65. Garden House's volume is currently 470,000 units. Competitors offer the same quality plants to garden centers for $4.20 each. Garden centers then mark them up to sell to the public for $8 to $11, depending on the type of plant. Read the requirements. Requirement 1. Garden House owners want to earn a 10% return on the company's assets. What is Garden House's target full cost? Calculate the target full cost for Garden House. Select the formula labels and enter the amounts. Less: Target full cost Requirement 2. Given Garden House's current costs, will its owners be able to achieve their target profit? Show your analysis. Calculate Garden House's current total full cost. Select the formula labels and enter the amounts. Total full cost Garden House's current total full costs of $ its target full cost. Garden House meet the owner's profit expectations. hieve its target profit? Show your analysis. Requirement 3. Assur that Sarde House has identified ways to cut its variable costs to $1.50 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to Target full cost Less: Reduced level of variable costs New target fixed costs V be able to achieve its target profit without having to take any other cost cutting measures. V. By reducing variable costs to $1.50, Garden House The new target fixed cost is
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Answer 1

Sales	1974000
Less: Desired Profit	685000
Target Full cost	1289000
Current Cost
Variable cost	775500
Fixed cost	584000
Total cost	1359500
Current cost is 70,500 more than target cost
does not meet expectations
Target full cost	1289000
Less: Reduced variable cost	705000
Target Fixed costs	584000
Will be able to achieve
Variable costs	705000
Plus: Fixed costs	584000
Advertising cost	94000
Total cost	1383000
Plus: Desired profit	685000
Target revenue	2068000
Number of units	470000
Cost plus price	4.4
Successful, expensive