Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Garden House operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Garden House has $6 million in assets. Its
Garden House operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Garden House has $6 million in assets. Its yearly fixed costs are $900,000, and the variable costs for the potting soil container, label, seedling, and labor for each gallon-sized plant total $1.15. Garden House's volume is currently 600,000 units. Competitors offer the same quality plants to garden centers for $3.90 each. Garden centers then mark them up to sell to the public for $8 to $10, depending on the type of plant. Read the requirements. Requirement 1. Garden House owners want to earn a 14% return on the company's assets. What is Garden House's target full cost? Calculate the target full cost for Garden House, Select the formula labels and enter the amounts. Less Target full cost Requirement 2. Given Garden House's current costs. vill its owners be able to achieve their target profit? Show your analysis. Calculate Gard en House's cur rrent total full cost. Select the fo rmula labels and enter the amounts Total full cost Garden House's current total full costs of s is s target full cost. Garden House meet the owner's profit expectations. Requirement 3. Assume that Garden House has identified ways to cut its variable costs to $1.0 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Show your analysis. 0 Target full cost Less: Reduced level of variable costs New target fixed costs The new target fixed cost is Y. By reducing variable costs to $1.00, Garden House Y be able to achieve its target profit without having to take any other cost cutting measures
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started