1.Harris Strong, the Marketing Manager for the Turboprop Company, has presented you with the following marketing options:
Option 1:Product selling price, $9; expected sales total, 58,000 units; variable costs are $3.80 per unit; fixed costs total $126,000
Option 2:Product selling price, $8; expected sales total 72,000 units; variable costs, $4.00 per unit; spend an additional $10,000 on advertising, which increases total fixed costs to $136,000
Option 3:Product selling price, $7.60; expected sales total, 76,000 units; variable costs reduced to $3.60 per unit; fixed costs total $142,000
Develop a schedule showing the profit from each of the three options. Which would you recommend? Why?
2.The following information is from the accounting systems of two local businesses:
Blondie's Catering Olga's Delights
Operating revenues$ 738,000$630,000
a.Compute asset turnover, profit margin and return on assets for each firm.
b.Based on your answers to part (a), describe the operating strategy for each firm.