Question:
Sales budget, service setting. In 2011, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and 16,400 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to $230 per test, he will have to face only a 7% decline in lead-test sales in 2012.
Assignment Material
1. Prepare a 2012 sales budget for Rouse & Sons assuming that Rouse holds prices at 2011 levels.
2. Prepare a 2012 sales budget for Rouse & Sons assuming that Rouse lowers the price of a lead test to $230. Should Rouse lower the price of a lead test in 2012 if its goal is to maximize sales revenue? Serving trays. Mendez's beginning inventory for 2012 is 15,000 trays and its target ending inventory is 25,000 trays. Compute the number of trays budgeted for production in 2012.