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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

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.

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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

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