17.Microtech manufactures computer software. Its best selling product is WordJuggle. This product has a profit margin of 15% and an asset turnover of 2.4 times. Operating revenues total $750,000.
Required:
a.Compute return on assets.
b.Compute total assets.
c.Compute net income.
d.Based on the above information, what operating strategy is probably used by Microtech for this product?
18.Diamond Fixtures, Inc. is concerned about the continuing profitability of one of its product lines—a shower massager. A new competitor has entered the market and Diamond Fixtures is worried about losing market share. Sean Flush, the Vice President of Marketing, has prepared the following market plans:
Plan 1:Charge a selling price of $68; expected sales total 35,000 units; variable costs are $24 per unit; fixed costs total $1,000,000.
Plan 2:Charge a selling price of $60; expected sales total 42,000 units; variable costs are $24 per unit; spend an additional $50,000 on advertising which increases total fixed costs to $1,050,000.
Plan 3:Charge a selling price of $54; expected sales total 54,000 units; variable costs are reduced to $22 per unit; fixed costs total $1,160,000.
Required:
Develop a schedule showing the profit from each of the three market plans. Which would you recommend? Why?