Mellie Computer Devices Inc. is considering the introduction of a new printer. T
ID: 2388622 • Letter: M
Question
Mellie Computer Devices Inc. is considering the introduction of a new printer. The company's accountant had prepared an analysis computing the target cost per unit but misplaced his working papers. From memory he remember the estimated until sales price was $200 and the target unit cost was $195. Sales were projected at 200,000 unit with a required 5,000,000 investment.Instructions:
Compute the required minimum rate of return.
Sales
Less target cost
Desired ROI (in dollars)
Investment
Minimum ROI
Explanation / Answer
Selling Price per unit= $200 cost per unit = $195 profit per unit = ($200-$195) $5 total sales given = 200000 units total selling price = 200x200,000 = $40,000,000 total cost incurred = 195x200,000 $39,000,000 net profit = $1,000,000 Investment = $5,000,000 ROI = profitx100/total capital employed =1,000,000x100/5,000,000 = 20.