1. Compute the selling price required to meet Wairimu's target of

700,000 as per approach (4) above

Wallace Waters Limited is a company based in Nairobi, Kenya. It is a family-owned business formed by Kamau Wallace and then handed down to her sons and daughters. It manufacturers a single product - a unique brand of vanilla flavoured spring water, produced to a special recipe known only to the family itself. The company is now run by the grandchildren of the founder, and they are having some problems in dealing with the competitive and crowded market for bottled spring waters. The management, led by Wairimu Wallace as CEO, are starting to prepare next year's budget and have assembled the following data. Their initial impression is that this set of forecast data will not produce an outcome satisfactory to them or the family shareholders. Thus, the management team has convened to consider some alternative approaches that might improve the outcome next year. The following approaches were discussed at a management meeting: Approach 1 Kimani Wallace, the CFO, considers that the company should look at re-positioning its products by moving upmarket and selling at higher prices. He believes that the market would accept a 10% increase in selling price per case. However, marketing expenditure would have to increase by 220,000 to convince the market of the improvement in the product. Fixed manufacturing overheads would have to rise by 50,000 per year as well. Kimani is also confident that this approach would also lead to a 10,000 increase in units sold - from 80,000 to 90,000 units. Approach 4 Wairimu Wallace has her own views, considering that the company needs to earn a minimum profit of 6700,000 for the year. She wants to focus on cutting costs and has identified some measures to reduce direct materials costs by 10%. Her view is if advertising expenditure is increased by 360,000, then sales will also increase by 10%. She estimates that fixed manufacturing overheads would have to rise by 625,000 . Also, she considers that administration overheads will need to rise by 617,000 . She wants to know the selling price required to achieve that profit outcome