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 remembers the estimated unit sales price was $200 and the target unit cost was $195. Sales were projected at 100,000 units with a required $5,000,000 investment. Compute the required minimum rate of return.

Answer 1

The required minimun return on investment was 10%

Step-by-step explanation:

the rate of return formula:

return / investment = rate of return

return: contribution er unit x total units

sales - cost = contribution

200- 195 = 5 contribution

5 contribution x 100,000 units = 500,000 return

500,000/5,000,000 = 0.1 = 10%