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Saguaro Sunscreen, Inc. has been selling sunscreen since established in 2008 by its former owner, Peter Jacobson. Based on sales from January through September,
Saguaro Sunscreen, Inc. has been selling sunscreen since established in 2008 by its former owner, Peter Jacobson. Based on sales from January through September, the company expects the current year sales will amount to 300,000 units. Cost estimates from the company's CFO, Jane Kraft, is provided below based on a production volume of up to 500,000 units: Manufacturing Costs for sunscreen bottles (based on production volume of 300,000 units): Direct Materials Direct Labor $0.80 per unit $0.50 per unit $0.70 per unit Variable Manufacturing Overhead $1.20 per unit $540,000 Packaging Fixed Manufacturing Overhead Selling and Administrative Costs for sunscreen bottles (based on sales volume of 300,000 units): Sales Commissions Shipping Costs Advertising and Promotion (fixed) Selling and Admin Expenses (fixed) $0.80 per unit $0.50 per unit $180,000 $250,000 Vijay Hari, the president of the company, is considering an alternative marketing plan for the current year that was presented to him by Jennifer Chen, the marketing manager. Jennifer spoke at the last staff meeting, stating: "At the present time, we sell the product to retailers for $8.00 per bottle. Retailers generally charge their customers between $9 and $9.50. If we cut our selling price to retailers to $7.50, I expect that the product will do much better. The retailers' increased markup will give them the incentive to display our product more. prominently and to promote it more vigorously to customers. We should support this strategy by supplying more promotional materials to retailers, which I expect would be an increase of $6,000 in Advertising and
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