The new chief executive officer (CEO) of Radco Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing:
Data table ? 500,000 units ? Total sales revenues Number of units produced and sold Selling price Operating income Total investment in assets Variable cost per unit Fixed costs for the year $ 220,000 $ 2,750,000 $ 2.30 $ 3,250,000 Print Done X Requirements 1. Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markup percentage on full cost for this product. 2. The new CEO has a plan to reduce fixed costs by $275,000 and variable costs by S0.25 per unit while continuing to produce and sell 500,000 units. Using the same markup percentage as in requirement 1, calculate the new selling price. 3. Assume the CEO institutes the changes in requirement 2 including the new selling price. However, the reduction in variable cost has resulted in lower product quality resulting in 10% fewer units being sold compared to before the change. Calculate operating income (loss). 4. What concerns, if any, other than the quality problem described in requirement 3, do you see in implementing the CEO's plan? Explain briefly. Print Done Requirement 1. Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markup percentage on full cost for this product. Begin by calculating the (a) total sales revenue. Rearrange the income statement formula to solve for the amount. Operating income $ 220,000 3,250,000 Fixed costs Contribution margin 3,470,000 1,150,000 Variable costs $ 4,620,000 Sales revenue (Round your answer to the nearest cent.) (b) The selling price per unit is $ 9.24 (c) Calculate the rate of return on investment. Determine the formula you will use and then enter the amounts. (Round the return on investment to the nearest whole percentage.) Operating income Total investment = Return on investment 8 % 220,000 2,750,000 (d) Calculate the markup percentage on full cost for this product. Determine the formula you will use and then enter the amounts. (Enter the per unit amounts to the nearest cent Enter the markup as a percentage rounded to two decimals.) Markup per unit Full cost per unit ) = Markup on full costs %
