Schwenn Products, a bicycle manufacturer, uses normal volume as the basis for setting prices. That is, it sets prices on the basis of long-term volume predictions and then adjusts these prices only for large changes in pay rates or materials prices. You are given the following information:

Materials, wages, and other variable costs$300per unit

Fixed costs$200,000per year

Target return on investment (ROI)25%

Normal volume1,500units per year

Investment (average total assets)$1,000,000

Required:

1. What sales price is needed to attain the 25% target ROI?

2. What ROI rate will be earned at sales volumes of 2,000 and 1,000 units, respectively, using the sales price you determined in requirement 1?