The Coffee Division of Arabian Coffee Products Is Planning the 2015

Essay

The Coffee Division of Arabian Coffee Products is planning the 2015 operating budget. Average operating assets of $1,500,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $400,000, while fixed costs are set at $250,000. The company's required rate of return is 18%.
Required:
a. Compute the sales volume necessary to achieve a 20% ROI.
b. The division manager receives a bonus of 50% of residual income. What is his anticipated bonus for 2015, assuming he achieves the 20% ROI from part (a)?