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Hi I was trying to do example 2, chapter 2 in course notes ‘Hawlett plc’.
I think im missing something, Im trying to understand the solution, is there some kind of formula used? Where can I get more info about it?The question mentions ROI which is not explained until a later chapter.
ROI is return on investment, and so the companies target is to earn a profit each year of 30% of investment i.e. 30% of 5M = $1.5M p.a..
SInce they expect to sell 40000 units, that means they need a profit per unit of 1.5M / 40,000 = $37.50.
Since the selling price p.u. is $67.50, this means the target (maximum) cost is
$30.00,Are you watching the lectures that go with the course notes?
Thank you John, its all clear now 😉
Im going through each chapter now and im trying to do each question and yes im watching the lectures as well:)
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