Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by-products. Its three furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost-conscious consumers and those who value the recycling of materials. The company wholesales its products to retailers and various mass merchandisers. Because of the seasonal nature of the products, most orders are manufactured during the winter months for delivery in the early spring. Michael Cain, founder and owner, is dismayed that sales for two of the products are tracking below budget. The following chart shows pertinent year-to-date data regarding the company's products. Certain that the shortfall was caused by a lack of effort by the sales force, Michael has suggested to Lisa Boyle, the sales manager, that the company announce two contests to correct this situation before it deteriorates. The first contest is a trip to Hawaii awarded to the top salesperson if incremental glider sales are attained to close the budget shortfall. The second contest is a golf weekend, complete with a new set of golf clubs, awarded to the top salesperson if incremental sales of chairs with footstools are attained to close the budget shortfall. The Hawaiian vacation would cost $16,500 and the golf trip would cost $12,500.

Required

1. Explain whether either contest is desirable or not.

2. Explain the strategic issues guiding your choice about these contests.

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Glider Chair with Footstool Table Actual Budget 3,300 Actual Budget 4,000 $ 85.00 Budget Actual 2,600 $ 80.00 3,500 Number of units Average sales price 6,900 8,000 $ 65.00 $ 6.00 $ 24.00 $ 25.00 Variable costs: Direct labor: Hours of labor Cost per hour Direct material Sales commission 2.50 2.25 $ 10.00 $ 15.00 $ 15.00 3.00 $ 9.25 $ 10.00 $ 10.00 3.25 $ 9.50 0.60 $ 9.00 $ 6.00 $ 5.00 0.50 $ 9.00 $ 5.00 $ 5.50 $ 11.00 $ 16.00 $ 15.00 $ 11.00 $ 10.00