Question: In 2011, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and 16,400 lead tests for $240 each. Because newer

In 2011, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and 16,400 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to $230 per test, he will have to face only a 7% decline in lead-test sales in 2012.

Required

1. Prepare a 2012 sales budget for Rouse & Sons assuming that Rouse holds prices at 2011 levels.

2. Prepare a 2012 sales budget for Rouse & Sons assuming that Rouse lowers the price of a lead test to $230. Should Rouse lower the price of a lead test in 2012 if its goal is to maximize sales revenue?

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