Question
Jenny is the president of the West division of X Inc. In December she reviews the division's projected accounting statements for the year. If she
Jenny is the president of the West division of X Inc. In December she reviews the division's projected accounting statements for the year. If she does nothing, she expects the division to have:
$5.04 million in revenue, $2.13 million variable costs, and $1.11 million in fixed costs, on volume of 96888 units. The division has $9.54 million in assets. X has a cost of capital of 11%.
Jenny will receive a $100,000 bonus if she can achieve an ROI of 23%, Clearly, she would like to do that. She considers the following schemes to earn the bonus.
First, West division could ship a lot of extra product to customers at year-end (called channel stuffing). Assuming the extra products sell at the typical cost and have the typical variable cost. How many extra units would West division need to sell to reach the ROI target?
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