CMAII Assignment
Question
Fancy Company has a total capital investment of $ and requires a target return on
investment. It has budgeted sales of units of the only product with the following budgeted
costs:
Required:
a Compute the selling price Fancy Company should charge to generate profits equal to the
required target return on investment.
b Based on your answer in a compute the average markup percentage for setting prices as a
percentage of: Price
i The full cost of the product
ii The variable cost of the product
iiiVariable manufacturing costs
ivTotal manufacturing costs
c A competitor initiates a price war and cut the price of a similar product to $ Fancy
Company reacts and wants to follow by cutting the price to $ It is expected that sales will
increase by How much should it reduce the full cost per unit to keep the return on
investment unchanged?
