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

region. Green 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\mathrm{.}15.$ Green House's volume is

currently $600,000$ units. Competitors offer the same quality plants to garden centers for $$3\mathrm{.}90$ each. Garden centers

then mark them up to sell to the public for $$9$ to $$11,$ depending on the type of plant.

Read the requirements.

Requirement $1.$ Green House owners want to earn a $14\%$ return on the company's assets. What is Green House's

target full cost?

Calculate the target full cost for Green House. Select the formula labels and enter the amounts.

Less:

Target full cost

Requirements

Green House owners want to earn a $14\%$ return on the company's assets. What is

Green House's target full cost?

Given Green House's current costs, will its owners be able to achieve their target profit? Show

your analysis.

Assume that Green House has identified ways to cut its variable costs to $$1\mathrm{.}00$ 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.

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 be affected, but it

hopes to gain more control over pricing. If Green House has to spend $$72,000$ this year to

advertise and its variable costs continue to be $$1\mathrm{.}00$ per unit, what will its cost$-$plus price be$?$

Do you think Green House will be able to sell its plants to garden centers at the cost$-$plus

price? Why or why not?