Grand Snacks makes candy bars for vending machines and sells them to vendors in cases of 30 bars. Although Grand Snacks makes a variety of candies, the cost differences are insignificant, and the cases all sell for the same price. Grand Snacks has a total capital investment of $20,000,000. It expects to produce and sell 750,000 cases of candy next year. Grand Snacks requires a 12% target return on investment. Expected costs for next year are:

Variable production costs	$4.50 per case
Variable marketing and distribution costs	$1.00 per case
Fixed production costs	$3,325,000
Fixed marketing and distribution costs	$400,000
Other fixed costs	$250,000

Requirements:

1.	What is the target operating income?
2.	What is the selling price Grand Snacks needs to charge to earn the target operating income? Calculate the markup percentage on full cost.
3.	Grand Snacks is considering increasing its selling price to $15 per case. Assuming production and sales decrease by 3%, calculate Grand Snacks' return on investment. Is increasing the selling price a good idea?

Answer rating: 100% (QA)

CALCULATIONS Total Variable co... View the full answer