Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are small and light. They are attached to arm bands and use flash memory. Models A-4 and A-5 are somewhat larger and use a built-in hard drive; they can be put into fanny packs for use while working out. It is now early 2007, and Audio-2-Go’s budgeting team is finalizing the sales budget for 2007. Sales in units and dollars for 2006 were as follows:

In looking over the 2006 sales figures, Audio-2-Go’s sales budgeting team recalled the following:

a. Model A-1 costs were rising faster than the price could rise. Preparatory to phasing out this model, Audio-2-Go, Inc., planned to slash advertising for this model and raise its price by 30 percent. The number of units of Model A-1 to be sold was forecast to be 50 percent of 2006 units.

b. Model A-5 was introduced on November 1, 2006. It contains a built-in 20 GB hard drive and can be synchronized with several popular music software programs.
Audio-2-Go brought out this model to match competitors’ audio players, but the price is so much higher than other Audio-2-Go products that sales have been disappointing. The company plans to discontinue this model on June 30, 2007, and thinks that 2007 monthly sales will remain at the 2006 level if the sales price remains at the 2006 level.

c. Audio-2-Go plans to introduce Model A-6 on July 1, 2007. It will be a highend player that will be lighter and more versatile than Model A-5 (which it will replace). The target price for this model is $180; unit sales are estimated to equal 2,500 per month.

d. A competitor has announced plans to introduce an improved version of Model A-3. Audio-2-Go believes that the Model A-3 price must be cut 20 percent to maintain unit sales at the 2006 level.

e. It was assumed that unit sales of all other models would increase by 10 percent, prices remaining constant.
Required:
Prepare a sales forecast by product and in total for Audio-2-Go, Inc., for 2007.

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Model Number Sold Price Revenue A-1 20,000 $ 50 $1,000,000 A-2 30,000 75 2,250,000 A-3 50,000 90 4,500,000 A-4 15,000 120 1,800,000 A-5 2,000 200 400,000 $9,950,000