Cheerful Chocolates Pty Ltd makes chocolate bars for vending machines and sells them to vendors in cases of 30 bars. Whilst there are a number of chocolate bars that Cheerful Chocolates produces, the cost differences are negligible and all cases sell for the same price.

Cheerful Chocolates has a total capital investment of$10,000,000. It expects to produce and sell 400,000 cases of chocolate bars next year. Cheerful Chocolates requires a 12% target return on investment.

Expected costs for next year are: Variable production costs

Variable marketing and distribution costs Fixed production costs Fixed marketing and distribution costs Other fixed costs

Required:

1. Using the data provided calculate the following:

Target operating profit

Selling price to earn target operating profit

$3.00 per case $2.00 per case $400,000 $700,000

$500,000

?Mark-up percentage on full cost 2. The company is considering increasing its price to $13 per case. It is likely that this will result in a 10%

decrease in production and sales. Complete the following:

Calculate the return on investment at this new selling price

Would this increase be worthwhile for the company? Explain your answer.

Cheerful Chocolates Pty Ltd makes chocolate bars for vending machines and sells them to vendors in cases of 30 bars. Whilst there are a number of chocolate bars that Cheerful Chocolates produces, the cost differences are negligible and all cases sell for the same price. Cheerful Chocolates has a total capital investment of$10,000,000. It expects to produce and sell 400,000 cases of chocolate bars next year. Cheerful Chocolates requires a 12% target return on investment. Expected costs for next year are: Variable production costs $3.00 per case Variable marketing and distribution costs $2.00 per case Fixed production costs $400,000 Fixed marketing and distribution costs $700,000 Required: 1. Using the data provided calculate the following: 0 Target operating prot - Selling price to earn target operating profit a Mark-up percentage on full cost 2. The company is considering increasing its price to $13 per case. It is likely that this will result in a 10% decrease in production and sales. Complete the following: 0 Calculate the return on investment at this new selling price 0 Would this increase be worthwhile for the company? Explain your