ATT Inc. sells a cordless phone for $ 50 per unit. The unit material cost is $ 10 and unit labor cost is $ 15. The annual manufacturing overheads are $ 1 million and promotion and advertising costs are $500,000. The product line has a $ 6 million investment and the expected return on its investment is 10%. What is $RLS for the company?

Answer: $4,200,000

Explanation:

GIVEN the following;

Unit selling price = $50

Unit material cost = $10

Unit labor cost = $15

Manufacturing overhead = $1,000,000

Promotion and advertising cost = $500,000

Investment worth cm = $6,000,000

Return on investment = 10%

Calculate the RLS:

Return on investment (ROI):

0.1 * $6,000,000 = $500,000

Fixed cost = $1,000,000 + $500,000 = $1,500,000

Contribution margin:

Selling price per unit - variable cost per unit

$ (50 - 25) = $25

RLS = [ (total fixed cost + ROI) : Contribution margin) ] * selling price per unit

$RLS = [$ (1,500,000 + 600,000) : $25) ] * $50

$RLS = ($2,100,000 : 25) * $50

$RLS = $84,000 * 50

$RLS = $4,200,000