Two weeks later, Mr. Mehdi met Mr. Ahmed to discuss new prices for each wind turbine model based on the report submitted by Mr. Ahmed concerning the cost per unit of each model under the new costing system (See Part 1). Mr. Mehdi shared his plan with Mr. Ahmed about pricing the turbines at full cost plus a markup on the full cost to earn the target return on investment. He informed Mr. Ahmed that the capital invested in WT_1, WT_2, WT_3 and WT_4 is $1,500,000, $1,500,000, $2,500,000 and $2,500,000 respectively and the target return on investment is 10% for all models. He further told Mr. Ahmed that the company expects no inventories. That is, it is expected that all units produced will be sold by the end of the current year. 

Given this, Mr. Mehdi asked Mr. Ahmed to help him determine the prices that should be charged for each turbine model.

Required:

Assuming you are Mr. Ahmed:

1. Calculate the operating income of each wind turbine model based on the target prices.

Answer rating: 100% (QA)

Calculation of Operating Income Particulars WD... View the full answer