ThatcherThatcher

Paints makes and sells paint to home improvement stores.

ThatcherThatcher's

only plant can produce up to

99

million cans of paint per year. Current annual production is

66

million cans. Fixed manufacturing, selling, and administrative costs total

$ 10.2$10.2

million per year. The variable cost of making and selling each can of paint is

$ 6.40$6.40.

Stockholders expect a

2525%

annual return on the company's

$ 35$35

million of assets.

Requirement 1. What is

ThatcherThatcher's

current total cost of making and selling

66

million cans of paint? What is the current cost per can of paint? Select the formula labels and enter the amounts to calculate

ThatcherThatcher's

current total cost and current cost per can of paint. (Enter currency amounts in dollars, not in millions. Enter unit values as whole numbers, not in millions. Round all currency amounts to the nearest whole dollar and round the cost per unit to the nearest cent, $X.XX.)

Plus:
Divided by:	Number of units
Total cost per unit		Requirement 2. Assume that

ThatcherThatcher

is a price-taker and the current wholesale market price is

$ 6.90$6.90

per can of paint. What is the target total of cost in producing and selling

66

million cans of paint? Given

ThatcherThatcher's

current total costs, will the company reach stockholders' profit goals?Begin by calculating

ThatcherThatcher's

target total cost. Select the formula labels and enter the amounts. (Enter currency amounts in dollars, not in millions. Round all currency amounts to the nearest whole dollar.)

Less:
Target total cost

Given

ThatcherThatcher's

current total costs, will the company reach stockholders' profit goals? (Enter currency amounts in dollars, not in millions.)

, the company

reach stockholders' profit goals. There will be a(an) $

.

Requirement 3. Continuing with Requirement 2, let's say that

ThatcherThatcher

has found ways to reduce its total fixed costs by

$ 270 comma 000$270,000.

What is the target variable cost per can of paint?Select the formula labels and enter the amounts to calculate

ThatcherThatcher's

target variable cost per can of paint. (Enter currency amounts in dollars, not in millions. Enter unit values as whole numbers, not in millions. Round cost per unit amounts to the nearest cent, $X.XX.)

Less:
Divided by:

Requirement 4. Suppose

ThatcherThatcher

plans to spend an additional

$ 1.9$1.9

million on advertising to differentiate its product in order to increase sales volume to

77

million cans and become more of a price-setter. Assume that

ThatcherThatcher

did reduce its total fixed costs by

$ 270 comma 000$270,000

as stated in Requirement 3 but could not find ways to save on its variable costs. What is the cost-plus price for a can of paint under these conditions?Select the formula labels and enter the amounts to calculate

ThatcherThatcher's

cost-plus price for a can of paint under these conditions. (Enter currency amounts in dollars, not in millions. Round cost per unit amounts to the nearestcent, $X.XX.)

Current total costs
Plus:
Divided by:
Cost-plus price per unit