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Grand-o-licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Grand -o-licious makes a variety of candy,
Grand-o-licious makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Grand -o-licious makes a variety of candy, the cost differences are insignificant, and the cases all sell for the same price. Grand -o-licious has a total capital investment of $11,000,000. It expects to produce and sell 650,000 cases of candy next year. Grand -o-licious requires a 10% target return on investment. Expected costs for next year are as follows: (Click the icon to view the costs.) Grand-o-licious prices the cases of candy at full cost plus markup to generate profits equal to the target return on capital. Read the requirements. $4.50 per case Variable production costs Variable marketing and distribution costs Fixed production costs Fixed marketing and distribution costs Other fixed costs $3.50 per case $3,100,000 $600,000 $400,000 1. What is the target operating income? 2. What is the selling price Grand-o-licious needs to charge to earn the target operating income? Calculate the markup percentage on full cost. 3. Grand-o-licious's closest competitor has just increased its candy case price to $18, although it sells 36 candy bars per case. Grand-o-licious is considering increasing its selling price to $17 per case. Assuming production and sales decrease by 7%, calculate Grand-o-licious' return on investment. Is increasing the selling price a good idea
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