Question
In this Discussion you do not have to post an answer before you can view others posts. Performance Sports produces inflatable rafts. Sales have grown
In this Discussion you do not have to post an answer before you can view others posts.
Performance Sports produces inflatable rafts. Sales have grown slowly, and cost increases are causing losses. Financial data for the most recent year are shown.
The management at Performance Sports arrived at these four possible courses of action:
- Increase the sales price for each raft by 10 percent, which will cause a 5 percent drop in sales volume. The group believes the increased sales price will more than offset the drop in rafts sold.
- Decrease the sales price for each raft by 10 percent, which will cause an 8 percent increase in sales volume. The group believes an increase in rafts sold will more than offset the sales price reduction.
- Increase advertising costs by $200,000, which will increase sales volume by 15 percent. The group believes the increase in rafts sold will more than offset the increase in advertising costs.
- Decrease the variable COGS by $10 per unit and the fixed COGS by $5,000, by using another vendor.
Each team member will choose an option that hasn't been chosen yet and have calculate its projected operating profit (loss). As a team, determine whether each option is acceptable, and discuss the advantages, disadvantages and possible issues of each one. Then choose which option is best.
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