- Requirements fil 1. Green House's owners want to earn a 13% return on the company's assets. What is Green House's target full cost? 2. Given Green House's current costs, will its owners be able to achieve their target profit? Show your analysis. 3. Assume that Green House has identified ways to cut its variable costs to $1.00 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. 4. Green House started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Plant City made this strategy work, so Green House has decided to try it too. Green House doesn't expect volume to be affected, but it hopes to gain more control over pricing. If Green House has to spend $120,000 this year to advertise and its variable costs continue to be $1.00 per unit, what will its cost-plus price be? Do you think Green House will be able to sell its plants to garden centres at the cost-plus price? Why or why not? ni Print Done Green House operates a commercial plant nursery where it propagates plants for garden centres throughout the region. Green House has $4.4 million in assets. Its yearly fixed costs are $580,000, and the variable costs for the potting soil, container, label, seedling, and labour for each plant total $1.15. Green House's volume is currently 480,000 units. Competitors offer the same quality plants to garden centres for $3.40 each. Garden centres then mark them up to sell to the public for $8 to $11, depending on the type of plant. Requirements ..... Requirement 1. Green House's owners want to earn a 13% 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. Target full cost Requirement 2. Given Green House's current costs, will its owners be able to achieve their target profit? Show your analysis. Calculate Green House's current total full cost. Select the formula labels and enter the amounts. Total full cost Green House's current total full costs of is its target full cost. Green House meet the owner's profit expectations. Requirement 3. Assume that Green House has identified ways to cut its variable costs to $1.00 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. Calculate the new target fixed cost. Target full cost Less: Reduced level of variable costs New target fixed costs The new target fixed cost is V. By reducing variable costs to $1.00, Green House be able to achieve its target profit without having to take any other cost cutting measures Requirement 4. Green House started an aggressive advertising campaign strategy to differentiate its plants from those grown by other nurseries. Plant City made this strategy work, so Green House has decided to try it too. Green House doesn't expect volume to be affected, but it hopes to gain more control over pricing. If Green House has to spend $120,000 this year to advertise and its variable costs continue to be $1.00 per unit, what will its cost-plus price be? Do you think Green House will be able to sell its plants to garden centres at the cost-plus price? Why or why not? Determine its cost-plus price. (Round the cost-plus price to the nearest cent.) Plus Plus Target revenue Divided by: Cost-plus price per unit Consumers will be more willing to pay the cost-plus price if the marketing campaign is Otherwise Green House may be considered a nursery