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The sales manager of Trishas Global Marketing (TGM) is considering expanding sales by taking their Original Widget and modifying it for export into the
The sales manager of Trishas Global Marketing (TGM) is considering expanding sales by taking their Original Widget and modifying it for export into the European and Asian markets. Relatively minor cosmetic changes will be made to enhance the product's appeal to local tastes. After reviewing the sales forecasts, the sales department feels that 40% of units sold will be the Original product, 30% will be new Euro model and the remainder will be the new Pacific model. The following information has been assembled by the sales and production departments: Original Euro Sales Price (per unit) $82.00 Material cost per unit) $26.00 Direct labor (per unit) $13.00 Variable OH (per unit) $74.00 Pacific $70.00 $28.00 $23.00 $14.00 $15.00 $17.00 $16.00 $16.00 The common fixed costs associated with the manufacture of these three products are $1,500,000 per year and TGM has a marginal tax rate of 25%. If the target sales mix is achieved and 120,000 total units are sold, calculate the estimated total profit before taxes assuming a $1.9 per unit increase in the sales price of the Original can be obtained by investing $40,000 in a sales campaign. No other assumptions are changed. Round to the nearest $1.00.
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