Answer:
Diamond Machine Technology
a) Markup price = $4.03
b) Target return price = $3.60
Explanation:
Investment = $250,000
Cost of each sharpener = $3
Additional fixed costs = $10,000
Quantity of sharpeners to sell for the year= 100,000
Markup on sales = 30%
Return on Investment (ROI) = 20%
Markup price = (($3 * 100,000) + $10,000))* 1.3
= $403,000 /100,000 = $4.03
Return on Investment:
Profit for the year = 100,000($4.03 - $3) - $10,000 = $93,000
ROI = $93,000/$250,000 * 100 = 37.2%
Target revenue = (20% of $250,000) + $310,000 = $360,000
Target return price = $360,000/100,000 = $3.60
