Grand Snacks makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Grand Snacks makes a variety of candies, the cost differences are insignificant, and the cases all sell for the same price. Grand Snacks has a total capital investment of $20,000,000. It expects to produce and sell 650,000 cases of candy next year. Grand Snacks requires a 12% target return on investment. Expected costs for next year are: |(Click the icon to view the costs.) Grand Snacks prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. Requirement 1. What is the target operating income? (Enter the percentage as a whole number.) Capital investment Target return on investment - Target operating income $ 2,400,000 $ 20,000,000 12 % = Requirement 2. What is the selling price Grand Snacks 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 8,112,000 3,744,000 Variable costs Contribution margin Fixed costs 1,500,000 Target operating income - - Requirements Data table 1. What is the target operating income? 2. What is the selling price Grand Snacks needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Grand Snacks is considering increasing its selling price to $13 per case. Assuming production and sales decrease by 4%, calculate Grand Snacks' return on investment. Is increasing the selling price a good idea? Variable production costs $4.50 per case Variable marketing and distribution costs $1.50 per case Fixed production costs $300,000 Fixed marketing and distribution costs $650,000 Other fixed costs $550,000 Print Done Print Done ITTY INCOME