Erickson Corporation manufactures two different coffee makers, Professional for commercial use and Home for family use. Vincent Erickson, the president, recently received complaints from some members of the board of directors about the company’s failure to reach the expected profit of $200,000 per month. Mr. Erickson is, therefore, under great pressure to improve the company’s bottom line. Under his direction, Kristen Yamada, the controller, prepared the following monthly cost data for Mr. Erickson.

The market price for coffee makers comparable to Professional is $58 and to Home is $18. The company’s administrative expenses amount to $125,000.

Round your figures to two decimal points.
a. Compute the cost per unit for both products.
b. Determine the company’s profit or loss.
c. Justin Wang, the marketing manager, recommends that the company implement a focused marketing strategy. He argues that advertisements in trade journals would be more effective for the commercial market than on TV. In addition, the cost of journal ads would be only $21,000. He also proposes sending discount coupons to targeted households to reach a broad market base. The coupons program would cost $72,000. Compute the new cost of each product, assuming that Mr. Erickson replaces TV advertising with Mr. Wang’s suggestions.
d. Determine the company’s profit or loss using the information in Requirementc.

  • CreatedFebruary 07, 2014
  • Files Included
Post your question