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In 2017, Cole & Sons, a small environmental-testing firm, performed 10,800 radon tests for $ 320 each and 15,000 lead tests for $ 240 each.
In 2017, Cole & Sons, a small environmental-testing firm, performed 10,800 radon tests for $ 320 each and 15,000 lead tests for $ 240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 9% 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 Cole feels that if he lowers his price for lead testing to $ 220 per test, he will have to face only a 7% decline in lead-test sales in 2018.
1. Prepare a 2018 sales budget for Cole & Sons assuming that Cole holds prices at 2017 levels.
2. Prepare a 2018 sales budget for Cole & Sons assuming that Cole lowers the price of a lead test to $ 220. Should Cole lower the price of a lead test in 2018 if the company's goal is to maximize sales revenue?
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