Question
Assume that you are managing a division that produces and sells 100,000 units every quarter. Your production capacity is 150,000 units, but the maximum amount
Assume that you are managing a division that produces and sells 100,000 units every quarter. Your production capacity is 150,000 units, but the maximum amount of production that the market can absorb is 100,000 units per quarter. The company uses absorption costing. Relevant cost data is as follows: Selling Price $35 Variable cost per unit 20 Fixed costs per quarter $1,200,000 Net Investment Required - (a) Calculate the ROI for Quarter 1. (b) Assume that you are paid a quarterly bonus based on your abilities to maximize ROI. Can you think of a way to increase ROI in quarter 2. Assume you intent to resign immediately after the second quarter.
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