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Target costing: Return on Sales for Caremore, Inc

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Target costing: return on sales

Stacy Yoo, president of Caremore, Inc., an appliance manufacturer in Seattle, Washington, has been trying to decide whether one of her product-line managers, Bill Mann, has been achieving the companywide return-on-sales target of 45%. Stacy has just received data from the new target costing system regarding Bill's operation. Bill's sales volume was 300,000 appliances with an average selling price of $500 and expenses totaling $90 million.

Determine whether Bill's return-on-sales ratio has met the companywide target. Has Bill done a good or poor job? Explain.

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Solution Summary

This problem explains the concepts related to target costing and how to calculate the return on sales. Shows the calculations in step-by-step manner for easy understanding.

Solution Preview

Sales Revenue = Sales Volume * Average Selling price = 300,000*500=$150,000,000=$150 ...

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