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?

$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

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