The Baseball Division of Home Run Sports manufactures and sells baseballs. Budgeted data for February 2000 are
Question:
The Baseball Division of Home Run Sports manufactures and sells baseballs. Budgeted data for February 2000 are as follows:
Required 1. Compute the minimum selling price per baseball necessary to achieve the target ROI of 30 percent. 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 2000, using the selling price from requirement 1. Home Run Sports uses a 12% required rate of return on total division assets when computing division RI. 4. In addition to her salary, Pamela Stephenson, the division manager, receives 3% of the monthly RI of the Baseball Division as a bonus. Compute Stephenson's bonus. Why do you think Stephenson is rewarded using both salary and a performance- based bonus? Stephenson does not like bearing risk.
Transcribed Image Text:
Current assets Long-term assets Total assets Production output Target ROI (Operating income + Total assets) Fixed costs Variable costs $ 400,000 600,000 $1,000,000 200,000 baseballs per month 30% $400,000 per month 54 per baseball
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