Answered: 1. Prepare a 2018 sales budget for Hart…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 18E: Carmichael Corporation is in the process of preparing next years budget. The pro forma income...

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Sales budget, service setting. In 2017, Hart & Sons, a small environmental-testing rm, performed 11,400 radon tests for $260 each and 15,000 lead tests for $210 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 12% 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 Hart feels that if he lowers his price for lead testing to $200 per test, he will have to face only a 4% decline in lead-test sales in 2018.

1. Prepare a 2018 sales budget for Hart & Sons assuming that Hart holds prices at 2017 levels.
2. Prepare a 2018 sales budget for Hart & Sons assuming that Hart lowers the price of a lead test to $200.
Should Hart lower the price of a lead test in 2018 if the company's goal is to maximize sales revenue?
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