Question:
Sales budget, service setting. In 2009, McGrath & Sons, a small environmental-testing firm, per: med 11,000 radon tests for $250 each and 15,200 lead tests for $200 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 5% increase in radon-test volume each year in the near future. Jim McGrath feels that if he lowers his price for lead testing to $190 per test, he will have to face only a 5% decline in lead-test sales in 2010.
1. Prepare a 2010 sales budget for McGrath & Sons assuming that McGrath holds prices at 2009 levels.
2. Prepare a 2010 sales budget for McGrath & Sons assuming that McGrath lowers the price of a lead test to $190 Should McGrath lower the price of a lead test in 2010 if its goal is to maximize sales revenue?