wrong = 5 down vote

6. ROCE Pricing, Target Costs Ramu is the Managing Partner of a business that has just finished building a Motel. He anticipates that he will rent these rooms for 16,000 room-nights next year. All rooms are similar and will rent for the same price. The following Operating costs are expected to be incurred for next year - *800 per room night Variable Operating Costs 17,50,000 cixed Costs: Salaries and Wages * 3,70,000 Maintenance of Building * 14,00,000 Other Operating and Administrative Costs *35,20,000 Total Fixed Costs The Capital invested is 760 Lakhs and the Firm expects 25% return on its investment. 7.19 1. 2. What price should be charged for a room-night? Market Research indicates that if the Price of a room-night as determined above is reduced by 10%, the number of rooms rented out will increase by 10%. Should the Firm reduce prices by 10%? 7. Cost Plus and Target Pricing All-Win Co. manufactures and sells 15,000 units of a product. The Full Cost per unit is = 200. The Company has fixed its price so as to earn a 20% Return on an Investment of 18,00,000. 1. Calculate the Selling Price per unit from the above. Also, calculate the Mark-up % on the Full Cost per unit. 2. If the Selling Price as calculated above represents a Mark-up % of 40% on Variable Cost per unit, calculate the Variable Cost per unit. 3. Calculate the Company's Income if it had increased the Selling Price to 230. Ai this Price, the Company would have sold 13,500 units. Should the Company have increased the Selling Price to 230? 4. In response to competitive pressures, the Company must reduce the price to 210 next year, in order to achieve sales of 15,000 units. The Company also plans to reduce its investment to 16,50,000. If a 20% Return on Investment should be maintained, what is the Target Cost per unit for the next year