In 2017, Hart & Sons, a small environmental-testing firm, performed 11,400 radon tests for $260 each and
Question:
In 2017, Hart & Sons, a small environmental-testing firm, performed 11,400 radon tests for $260 each and 15,000 lead tests for $210 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 12% next year. However, awareness of radon-related health hazards is expected to result in a 5% increase in radon-test volume each year in the near future. Jim Hart feels that if he lowers his price for lead testing to $200 per test, he will have to face only a 4% decline in lead-test sales in 2018.
Required
1. Prepare a 2018 sales budget for Hart & Sons assuming that Hart holds prices at 2017 levels.
2. Prepare a 2018 sales budget for Hart & Sons assuming that Hart lowers the price of a lead test to $200. Should Hart lower the price of a lead test in 2018 if the company’s goal is to maximize sales revenue?
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan