Dig We Must, Inc. produces three different grades of shovels. The differences among the shovels are due to the materials and construction of the handles. These differences result in cost and selling price differences. DWM€™s product strategy is to provide high quality, long-lasting tools. Originally, the target market was construction and landscape design companies. They introduced the low-price model when home renovation enthusiasts started asking for DWM products but seemed reluctant to pay the price for professional-grade tools. Estimated sales information for the upcoming 6 months is as follows (assume an even distribution over the 6 months).

 

Due to an upturn in the housing market and a stronger economy, 3 months into this 6-month planning period, actual sales information indicated the following.

Required:

A. Analyze the market share and market size variances.

B. A nalyze the actual results in terms of DWM€™s product differentiation goals. Make suggestions to DWM management.

As a result of the results for the first 3 months, DWM increased the selling price of the professional-grade shovel to $160 and the home repairs shovel to $35. Further, the selling price of the performance grade shovel was reduced to $85. The sales results for the second 3 months are as follows.

Required:

A. Analyze the market changes and the effect of the sales price change.

B. Make recommendations to DWM management for next year€™s peak 6-month season.

Transcribed Image Text:

Market Size (shovels) DWM Sales (shovels) 25,000 5,000 Selling Price $150 Variable Costs Professional Grade Performance Grade Home Repairs $50 $40 $15 30,000 20,000 50,000 $ 90 $ 30 10,000 Market Size (shovels) 20,000 DWM Sales (shovels) 18,000 1,800 10,000 Selling Price Variable Costs Professional Grade Performance Grade Home Repairs $150 $ 90 $50 $40 8,000 35,000 $ 30 $15