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Unformatted text preview: 4. Target profit = asset investment x rate of return = $27,000,000 x 14% = $3,780,000 Revenue = target profit + variable cost + fixed cost = $3,780,000 + (25,000 hours x $33) + $2,850,000 = $7,455,000 No. A 14% return requires that MSC generate revenue per service hour of $298.20 ($7,455,000 25,000 hours), which is clearly in excess of the $265 market price. 5. To achieve a 14% return and a $265 revenue-per-hour figure, the company must trim its costs. MSC could use value engineering, a technique that utilizes information collected about a services design and associated production process. The goal is to examine the design and process and then identify improvements that would produce cost savings....
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This document was uploaded on 02/01/2011.
- Spring '09