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What do you know about profitability index

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Reference no: EM133038101

Question - Zahra Products Corporation (ZPC) is a company as a new player to enter the laptop market. ZPC believes that in order to be competitive in world market, the price of the laptop that the company is developing cannot exceed $. ZPC's required ROR is 10% on all investments. An investment of $ 600,000 would be required to purchase the equipment needed to produce the 1,000 laptops that ZPC's manager believes can be sold each year at the $ 800 price. Required:

a. Compute the target cost of one laptop and show your calculation!

b. Based on the result of actual company business of last month. Selling price $ 810 per unit but variable cost is used of their calculation above. If you are a marketer and sale commission will be counted based on 7% of dollar sale basis, then you can sale 10 laptops how much sale commission can you earn? Show your calculation!

c. What do you know about profitability index? You have to make a certain case that shows the importance of profitability index effect on making a business decision!

Reference no: EM133038101

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