Question

In 2012, Canseco & Sons, a small environmental-testing firm, performed 12,400 radon tests for $ 310 each and 16,600 lead tests for $ 210 each. Because new homes are being built with lead- free pipes, lead- testing volume is expected to decrease by 13% next year. However, awareness of radon- related health hazards is expected to result in a 4% increase in radon- test volume each year in the near future. Jim Canseco feels that if he lowers his price for lead testing to $ 190 per test, he will have to face only a 6% decline in lead- test sales in 2013.

Required
1. Prepare a 2013 sales budget for Canseco & Sons assuming that Canseco holds prices at 2012 levels.
2. Prepare a 2013 sales budget for Canseco & Sons assuming that Canseco lowers the price of a lead test to $ 190. Should Canseco lower the price of a lead test in 2013 if its goal is to maximize sales revenue?
3. How might Jim Canseco use the budget developed in requirement 2 to better manage the company?



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  • CreatedJanuary 15, 2015
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