Problem
Roxy's Recording Studio rents studio time to musicians in two-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music producer/mixer. Anticipated annual volume is 1,040 sessions. The company has invested $2,026,000 in the studio and expects a return on investment of 25%. Budgeted costs for the coming year are as follows:
|
Per Session
|
Total
|
|
Direct materials (tapes, CDs, etc.)
|
$20
|
|
|
Direct labour
|
400
|
|
|
Variable overhead
|
60
|
|
|
Fixed overhead
|
|
$1,008,800
|
|
Variable selling and administrative expenses
|
45
|
|
|
Fixed selling and administrative expenses
|
|
499,200
|
Determine the desired ROI per session.