Cravings makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Cravings makes a variety of candies, the cost differences are insignificant, and the cases all sell for the same price. Cravings has a total capital investment of $13,000,000. It expects to produce and sell 700,000 cases of candy next year. Cravings requires a 12% target return on investment. Expected costs for next year are: (Click the icon to view the costs.) Cravings prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Variable production costs $2.50 per case Variable marketing and distribution costs $2.00 per case Fixed production costs $4,240,000 Fixed marketing and distribution costs $450,000 Other fixed costs $400,000 1. What is the target operating income? 2. What is the selling price Cravings needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Cravings is considering increasing its selling price to $15 per case. Assuming production and sales decrease by 4%, calculate Cravings' return on investment. Is increasing the selling price a good idea? Requirement 1. vvnat is the target operating income? (Enter the percentage as a whole number.) Capital investment $ 13,000,000 Target return on investment = Target operating income 12 % = $ 1,560,000 Requirement 2. What is the selling price Cravings needs to charge to earn the target operating income? Calculate the markup percentage on full cost. Begin by calculating the target revenues by working backwards from the target operating income. Target revenues Variable costs Contribution margin 3150000 Fixed costs 1560000 Target operating income