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24 February, 04:50

Gator Sports Inc. needs to decide on the price to charge for their 10,000 new football shirts they are producing for the fall. Their total variable cost is $100,000 and their total fixed cost is $100,000. Gator Sports Inc. invested $2 million in specialized equipment, and their target ROI is 20%. Using target ROI pricing, what should the selling price be?

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  1. 24 February, 05:13
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    The selling price should be $60

    Explanation:

    ROI = Profit / Investment

    ↔ 20% = Profit / 2,000,000

    → Profit = 20% * 2,000,000 = $400,000

    Profit = Sales - cost

    ↔ 400,000 = Selling price * 10,000 units - (variable cost of $100,000 + Fixed cost of $100,000)

    ↔ 400,000 = Selling price * 10,000 - 200,000

    → Selling price = 600,000/10,000 = $60
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