situations and make recommendations to the management team. Read the requirements, Competitors offer a similar product, at the same quality, to retailers for $3.60 each. Durant's management team wants to earn a 10% return on investment on the division's assets. 1a. What is Division A's target full product cost? 1b. Given the division's current costs, will Division A be able to achieve its target profit? Begin by calculating Division A's current full product cost. Division A's current full product costs are its target full product cost, therefore Division A be able to acheive its target profit. Begin by calculating Division A's new target fixed cost. 1 Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are the new target fixed cost amount, Division A be able to achieve its target profit without having to take any other cost cutting measures. Why or why not? Begin by calculating the cost-plus price per unit. (Round your answar to the nearest cent.) Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.) Do you think Division A will be able to sell its product at the cost-plus price? Why or why not? If the advertising campaign is effective, Division A be able to sell its product at this price because it is not significantly higher than the $3.60 charged by competitors. The division manager of Division B received the following operating income data for the past year: 'Click the icon to view the Division B operating income data.) fixed selling and administrative expenses by \$14,000. 1. Division A of Durant, Inc. has $5,400,000 in assets. Its yearly fixed costs are $570,500, and the variable costs of its product line are $1.35 per unit. The division's volume is currently 490,000 units. Competitors offer a similar product, at the same quality, to retailers for $3.60 each. Durant's management team wants to earn a 10% 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 $1.20 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 $90,000 next year to advertise and its variable costs continue to be $1.20 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? 2. The division manager of Division B received the following operating income data for the past year: (Click the icon to view the Division B operating income data.) The manager of the division is surprised that the T205 product line is not profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $77,000 and decrease fixed selling and administrative expenses by $14,000. a. Prepare a differential analysis to show whether Division B should drop the T205 product line. b. What is your recommendation to the manager of Division B ? 3. Division C also produces two product lines. Because the division can sell all of the product it can produce, Durant is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: (Click the icon to view the Division C product data.) After expansion, the factory will have a production capacity of 4,400 machine hours per month. The plant can manufacture either 26 units of K707s or 58 units of G582s per machine hour. a. Identify the constraining factor for Division C. b. Prepare an analysis to show which product line to emphasize. 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,500,000. Expected annual net cash inflows are $1,550,000, with zero residual value at the end of 10 years. Under Plan B, Division D would begin producing a new product at a cost of $8,100,000. This plan is expected to generate net cash inflows of $1,050,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,200,000. Division D uses straight-line depreciation and requires an annual return of 10%. situations and make recommendations to the management team. Read the requirements, Competitors offer a similar product, at the same quality, to retailers for $3.60 each. Durant's management team wants to earn a 10% return on investment on the division's assets. 1a. What is Division A's target full product cost? 1b. Given the division's current costs, will Division A be able to achieve its target profit? Begin by calculating Division A's current full product cost. Division A's current full product costs are its target full product cost, therefore Division A be able to acheive its target profit. Begin by calculating Division A's new target fixed cost. 1 Will this decrease in variable costs allow the company to achieve its target profit? Since the company's actual fixed costs are the new target fixed cost amount, Division A be able to achieve its target profit without having to take any other cost cutting measures. Why or why not? Begin by calculating the cost-plus price per unit. (Round your answar to the nearest cent.) Why or why not? Begin by calculating the cost-plus price per unit. (Round your answer to the nearest cent.) Do you think Division A will be able to sell its product at the cost-plus price? Why or why not? If the advertising campaign is effective, Division A be able to sell its product at this price because it is not significantly higher than the $3.60 charged by competitors. The division manager of Division B received the following operating income data for the past year: 'Click the icon to view the Division B operating income data.) fixed selling and administrative expenses by \$14,000. 1. Division A of Durant, Inc. has $5,400,000 in assets. Its yearly fixed costs are $570,500, and the variable costs of its product line are $1.35 per unit. The division's volume is currently 490,000 units. Competitors offer a similar product, at the same quality, to retailers for $3.60 each. Durant's management team wants to earn a 10% 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 $1.20 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 $90,000 next year to advertise and its variable costs continue to be $1.20 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? 2. The division manager of Division B received the following operating income data for the past year: (Click the icon to view the Division B operating income data.) The manager of the division is surprised that the T205 product line is not profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $77,000 and decrease fixed selling and administrative expenses by $14,000. a. Prepare a differential analysis to show whether Division B should drop the T205 product line. b. What is your recommendation to the manager of Division B ? 3. Division C also produces two product lines. Because the division can sell all of the product it can produce, Durant is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: (Click the icon to view the Division C product data.) After expansion, the factory will have a production capacity of 4,400 machine hours per month. The plant can manufacture either 26 units of K707s or 58 units of G582s per machine hour. a. Identify the constraining factor for Division C. b. Prepare an analysis to show which product line to emphasize. 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,500,000. Expected annual net cash inflows are $1,550,000, with zero residual value at the end of 10 years. Under Plan B, Division D would begin producing a new product at a cost of $8,100,000. This plan is expected to generate net cash inflows of $1,050,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,200,000. Division D uses straight-line depreciation and requires an annual return of 10%