Fantabulous Products sells 2,200 kayaks per year at a price of $470 per unit. Fantabulous sells in a highly competitive market and uses target pricing. The company has $1,000,000 of assets, and the shareholders wish to make a profit of 18% on assets. Assume all products produced are sold. What is the target full product cost?

A) $854,000

B) $18,000,000

C) $1,220,120

D) $1,034,000 Off Road Concepts, Inc. produces a special kind of light-weight, recreational vehicle that has a unique design. It allows the company to follow a cost-plus pricing strategy. It has $8,000,000 of average assets, and the desired profit is a 7% return on assets. Assume all products produced are sold. Additional data are as follows

Sales volume

2,000

units per year

Variable costs

$1,000

per unit

Fixed costs

$3,500,000

per year

Using the cost-plus pricing approach, what should be the sales price per unit?

A) $3,065

B) $8,000

C) $1,070

D) $3,030 A company has two different products that are sold in different markets. Financial data are as follows:

Product A

Product B

Total

Revenue

$16,000

$9,300

$25,400

Variable cost

(9,000)

(9,900)

(18,900)

Fixed cost (allocated)

(3,000)

(2,100)

(5,100)

Operating income (loss)

$4,000

$(2,600)

$1,400

Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. If Product B is dropped, what would be the impact on total operating income of the company?

A) increases by $2,100

B) decreases by $600

C) decreases by $2,100

D) increases by $600 Flint Systems is considering investing in production-management software that costs $630,000, has $67,000 residual value, and leads to cost savings of $1,650,000 per year over its five-year life. Calculate the average amount invested in the asset that should be used for calculating the accounting rate of return.

A) $697,000

B) $630,000

C) $348,500

D) $67,000 10th EditionEugene F. Brigham, Joel Houston777 solutions

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