question archive Choice Culinary Supply, Inc
Choice Culinary Supply, Inc
Subject:AccountingPrice: Bought3
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Choice Culinary Supply, Inc., sells restaurant equipment and supplies throughout most of the United States. Management is considering adding a gelato machine to its line of ice cream making machines. Management will negotiate the price of the gelato machine with its Italian manufacturer. |
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Management of Choice Culinary Supply believes the gelato machines can be sold to its customers in the United States for $3,795 each. At that price, annual sales of the gelato machine should be 80 units. If the gelato machine is added to Choice Culinary Supply's product lines, the company will have to invest $50,000 in inventories and special warehouse fixtures. The variable cost of selling the gelato machines would be $350 per machine. |
| 1. |
If Choice Culinary Supply requires a 20% return on investment (ROI), what is the maximum amount the company would be willing to pay the Italian manufacturer for the gelato machines? |
| Maximum allowable purchase price per machine | $ |
| 2. | Management would like to know how the purchase price of the machines would affect Choice Culinary Supply%u2019s ROI. Compute the ROI for purchase prices between $2,400 and $3,400 per machine. |
| Purchase price | ROI |
| $2,400 | % |
| $2,500 | % |
| $2,600 | % |
| $2,700 | % |
| $2,800 | % |
| $2,900 | % |
| $3,000 | % |
| $3,100 | % |
| $3,200 | % |
| $3,300 | % |
| $3,400 | % |
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