Base? Line, Inc. makes tennis balls. The company can produce up to? 500,000 cans of balls per year. Current annual production is? 450,000 cans. Annual fixed costs total? $150,000. The variable cost of making and selling each can of balls is? $0.75. Owners expect a? 15% annual return on the? company's $1,000,000 in assets. Assume that Base Line is a price taker in a highly competitive environment. The current market price for a can of balls produced by manufacturers similar to Base Line is ?$1.45
1) If Base Line is unable to reduce its total fixed costs below? $150,000, what should its target unit variable cost? be?
A. $0.75
B. ?$0.71
C. ?$1.35
D. ?$1.45
E. $0.78
2) Base Line has hired a marketing agency to help it gain more control over its sales price. The? agency's fee for developing the advertising campaign is $76,199.Assuming sales volume and other costs will not be affected by the advertising? campaign, what would Base? Line's cost plus price? be?
A. ?$1.59
B. ?$1.42
C. ?$0.92
D. ?$1.45
E. $1.43