Deborah Lewis, General Manager of the Northwest Division of Berkshire

question 63

Essay

Deborah Lewis, general manager of the Northwest Division of Berkshire Enterprises, has significant authority over pricing decisions as well as programs that involve cost reduction/control. The data that follow relate to upcoming divisional operations:
Average invested capital: $15,000,000
Annual fixed costs: $3,900,000
Variable cost per unit: $80
Number of units expected to be sold: 120,000
Required:
A. Top management will promote Lewis if she can earn a 14% return on investment for the year. What unit selling price should she establish to get her promotion?
B. Independent of part "A," assume the unit selling price is $132 and that Berkshire has a 16% imputed interest charge. Top management will promote Lewis to corporate headquarters if her division can generate $200,000 of residual income. If Lewis desires to move to corporate, what must the division do to the amount of annual fixed costs incurred? Show your calculations.

Recognize the importance of reflective practice in applying theoretical knowledge to solve practical problems.

Understand the role of socioeconomic status and culture in development.

Appreciate the continuous nature of brain development and the concept of neural plasticity.

Understand the importance of marketing research in product demand determination and pricing strategies.

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Definitions:

Strawberries

A soft, red fruit with a sweet taste and small seeds on its surface, often eaten fresh or used in desserts.

Unemployment

A situation where individuals who are capable of working and willing to work cannot find employment.

Inefficiently Allocates

Describes a scenario where resources are not distributed or utilized in the most effective manner, leading to potential waste or misallocation.

Production Possibilities Frontier

A graph that shows the highest potential production levels for two or more products based on available resources.