Compute the per unit selling price

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Reference no: EM132826527

Question - KBCS is a diversified company producing and distributing different products. Product AB division within the company handles a specific product and would like to earn a long-run rate of return of 25%. Product X division will charge its unit selling price as necessary to provide this return. The following data are available on the division and its products:

Variable Cost per unit 300

Total annual fixed costs 14,00,000

Long run normal demand 20,000 units each year

Average operating assets owned by the division 24,00,000

Required -

(i) Compute the per unit selling price that will provide the desired rate of return

(ii) Assume that actual sales fluctuate from 16000 units to 24000 units. Compute the margin, turnover and ROI that would be realised on sales at 16000 units, 20,000 units and 24000 units level of activity (use the selling price computed in part (i) for your computations.

Reference no: EM132826527

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