Question
ABC Co. manufactures a variety of computer games. D. Vallejo, President, is disappointed in the sales of a new basketball game. The game sold is
ABC Co. manufactures a variety of computer games. D. Vallejo, President, is disappointed in the sales of a new basketball game. The game sold is only 2,000 units in 2011 when 10,000 were projected.Sales for 2012 look no better.At P75 per game, it is not a hot seller. Direct costs of the board game are P35 variable cost and P35,000 fixed. D is considering several options.
Option 1:Cut the price to P45 and perhaps sell 5,000 units.
Option 2:Cut the price to P35, reduce material costs by P2, and cut advertising by P20,000. Anticipated volume for this option is 3,000 units.
Option 3:Cut the price to P50 and include a P5 mail-in rebate offer. It is anticipated that 4,000 units could be sold and only 25% of the rebate coupons would be redeemed.
Which option is preferred?
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