Green House operates a commercial plant nursery where it propagates plants for garden centers throughout the region. Green House

GreenHouse has $ 3.5 million in assets. Its yearly fixed costs are $470,000, and the variable costs for the pottingsoil, container,label, seedling, and labor for eachgallon-sized plant total $ 1.60. Green House's volume is currently 500,000 units. Competitors offer the same quality plants to garden centers for $ 3.30 each. Garden centers then mark them up to sell to the public for $ 8 to $ 9 depending on the type of plant.

1.

Green House owners want to earn a 13% return on thecompany's assets. What is Green House's target fullcost?

2.Given Green House's currentcosts, will its owners be able to achieve their targetprofit? Show your analysis.

3. Assume that Green House has identified ways to cut its variable costs to $ 1.45 per unit. What is its new target fixedcost? Will this decrease in variable costs allow the company to achieve its targetprofit? Show your analysis.

4. Green House started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Green House doesn't expect volume to beaffected, but it hopes to gain more control over pricing. If Green House has to spend $40,000 this year to advertise and its variable costs continue to be $ 1.45 perunit, what will itscost-plus pricebe? Do you think Green House will be able to sell its plants to garden centers at thecost-plus price? Why or whynot?