4. Product Pricing and Gross Profit Variance Analysis (30 pts) Mongol Company manufactures office equipment for sale to retail stores. The vice-president for marketing has proposed that Mongol introduce two new products: an electronic stapler and an electronic pencil sharpene. Mongol Company's Profit Planning Department has been requested to develop preliminary sales prices for the two products for review. The Profit Planning Department is to follow the company's standard policy for developing potential sales prices, using as much data as are available for each product. Data accumulated by the Profit Planning Dept. are shown in the following table: 4 Electric Electric Pencil Stapler Sharpener Estimated annual demand in units 12,000 10,000 Estimated unit manufacturing costs 10 12 Estimated units in marketing and administrative expenses not available Asses employed in manufacturing 180,000 not available Mongol Company to employ an average of P2,400,000 in asset to support its operations in the current year. The condensed pro forma operating income statement represents Mongol's planned goals with respect to cost relationship and return on capital employed for the entire company for all its products. Mongol Company Pro Foma Operating Income Statement For the year Ending December 31, 2020 Sales Revenue P 4,800,000 Cost of Goods Sold 2.880.000 Gross Profit 1.920.000 Marketing and Administrative Expenses 1.440.000 Operating Income 480,000 Required: 1. Calculate the potential sales price for the following: a. The electric stapler, using the return-on-capital employed pricing b. The electric sharpener, using gross profit-margin pricing 2. Should a sales price for the electric pencil sharpener be calculated using the return-on-capital- employed pricing? Explain your answer. 3. Which of the two pricing methods (retum-on-capital employed or gross profit margin is appropriate for decision analysis. Justify. The vice-president of marketing has received from the Profit Plaming Department the potential sales prices for two new products. Discuss the additional steps that the vice-president is likely to take to set an actual sales price for each of the two products. Required: Prepare your own individual case study analysis and comprehensive solution to each given questions. 4. Product Pricing and Gross Profit Variance Analysis (30 pts) Mongol Company manufactures office equipment for sale to retail stores. The vice-president for marketing has proposed that Mongol introduce two new products: an electronic stapler and an electronic pencil sharpene. Mongol Company's Profit Planning Department has been requested to develop preliminary sales prices for the two products for review. The Profit Planning Department is to follow the company's standard policy for developing potential sales prices, using as much data as are available for each product. Data accumulated by the Profit Planning Dept. are shown in the following table: 4 Electric Electric Pencil Stapler Sharpener Estimated annual demand in units 12,000 10,000 Estimated unit manufacturing costs 10 12 Estimated units in marketing and administrative expenses not available Asses employed in manufacturing 180,000 not available Mongol Company to employ an average of P2,400,000 in asset to support its operations in the current year. The condensed pro forma operating income statement represents Mongol's planned goals with respect to cost relationship and return on capital employed for the entire company for all its products. Mongol Company Pro Foma Operating Income Statement For the year Ending December 31, 2020 Sales Revenue P 4,800,000 Cost of Goods Sold 2.880.000 Gross Profit 1.920.000 Marketing and Administrative Expenses 1.440.000 Operating Income 480,000 Required: 1. Calculate the potential sales price for the following: a. The electric stapler, using the return-on-capital employed pricing b. The electric sharpener, using gross profit-margin pricing 2. Should a sales price for the electric pencil sharpener be calculated using the return-on-capital- employed pricing? Explain your answer. 3. Which of the two pricing methods (retum-on-capital employed or gross profit margin is appropriate for decision analysis. Justify. The vice-president of marketing has received from the Profit Plaming Department the potential sales prices for two new products. Discuss the additional steps that the vice-president is likely to take to set an actual sales price for each of the two products. Required: Prepare your own individual case study analysis and comprehensive solution to each given questions