The baseball division of Home Run Sports manufactures and sells baseballs. Assume production equals sales. Budgeted data for February 2020 are as follows:

Required:

1. Compute the minimum selling price per baseball necessary to achieve the target ROI of 30%.
2. Using the selling price from requirement 1, separate the target ROI into its two components using the DuPont method.    

3. Compute the RI of the baseball division for February 2020, using the selling price from requirement 1. Home Run Sports uses a required rate of return of 12% on total division assets when computing division RI.
4. In addition to her salary, Amanda Kelly, the division manager, receives 3% of the monthly RI of the baseball division as a bonus. Compute Kelly’s bonus. Why do you think Kelly is rewarded using both salary and a performance-based bonus? Kelly does not like bearing risk.

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Current assets Long-term assets Total assets Production output Target ROI (Operating income Total assets) Fixed costs Variable cost $ 400,000 600,000 $1,000,000 $ $ 200,000 baseballs per month 30% 400,000 per month 4 per baseball