Requirements:

Review the scenario in the document attached above and address Requirement 1. Complete the calculations in the Excel template provided below.

Darren Dillard, majority stockholder and president of Dillard Inc., is working with his top managers on future plans for the company. As the company's managerial accountant, you have been asked to analyze the following situations and make recommendations to the management team. Requirements: 1. Division A of Dillard, Inc. has $5,250,000 in assets. Its yearly fixed costs are $557,000, and the variable costs of its product line are $1.90 per unit. The division's volume is currently 500,000 units. Competitors offer a similar product, at the same quality, to retailers for $4.25 each. Dillard's management team wants to earn a 12% return on investment on the division's assets. a. What is Division A's target full product cost? b. Given the division's current costs, will Division A be able to achieve its target profit? c. Assume Division A has identified ways to cut its variable costs to $1.75 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the division to achieve its target profit? d. Division A is considering an aggressive advertising campaign strategy to differentiate its product from its competitors. The division does not expect volume to be affected, but it hopes to gain more control over pricing. If Division A has to spend $120,000 next year to advertise and its variable costs continue to be $1.75 per unit, what will its cost-plus price be? Do you think Division A will be able to sell its product at the cost-plus price? Why or why not? \begin{tabular}{|l|l|} \hline Requirement 1(a) & \multicolumn{1}{|l|}{} \\ \hline Revenue at market price & \\ \hline Less: Desired profit & \\ \hline Target full product cost & \\ \hline & \\ \hline Requirement 1(b) & \\ \hline Current variable costs & \\ \hline Plus: Current fixed costs & \\ \hline Current full product cost & \\ \hline & \\ \hline Requirement 1(c) & \\ \hline Target full product cost & \\ \hline Less: Variable cost & \\ \hline Target fixed cost & \\ \hline Requirement 1(d) & \\ \hline Current variable costs per unit & \\ \hline Plus: Fixed costs & \\ \hline Full product cost & \\ \hline Plus: Desired profit & \\ \hline Cost-plus price & \\ \hline Divided by volume & \\ \hline Cost-plus price per unit & \\ \hline \end{tabular}