problem 1 harris strong the marketing manager for the turboprop company has presente 4352259

 

PROBLEM

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

Required:

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

Net income406,000176,000

Total assets$1,420,000$840,000

Required:

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.

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