Question
Task 2 They believe it will cost them $250,000 to purchase the land near Fort Lee and to build a bakery and storefront. Your task
Task 2
They believe it will cost them $250,000 to purchase the land near Fort Lee and to build a bakery and storefront. Your task is:
1) Calculate Return on Investment if the expected increase in net income, due to opening the new location near Ft. Lee, is $35,000.
2) Calculate Asset Turnover Rate and Margin if the expected sales increased to $450,000
3) Calculate Residual Income if the required rate of return is 15%.
Type of cake | Expected Annual sales | Selling Price per cake | Raw Ingredient (Direct Materials)cost per cake | Direct Labor Hour per cake |
1 tier wedding cake | 100 | $200 | $40 | 4 |
2 tier wedding cake | 300 | $300 | $50 | 5 |
3 tier wedding cake | 250 | $400 | $75 | 8 |
Large sheet cake | 450 | $100 | $25 | 4 |
Medium sheet cake | 600 | $90 | $15 | 2 |
Small sheet cake | 750 | $50 | $10 | 2 |
Expense | Estimated annual amount |
Total direct materials | $65,500 |
Total direct labor | $126,000 |
Total factory overhead | $47,900 |
Selling Cost | $17,500 |
Adminstrative Costs | $108,700 |
Total Costs | $365,600 |
Variable verses Fixed Costs | |
Total Variable Costs | $215,600 |
Total Fixed Costs | $150,000 |
Total costs | $365,600 |
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