Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Pringly Division

A meeting of senior managers at Pringly Division has been called to expalin the pricing strategy for a new product. Part of the discussion would focus on estimating sales for the new product. Over the past years, a number of new products have failed to meet their sales targets. It appears that company’s profit for the year would be lower than budget and the major reason for this is the disappointing sale of new products.
This time a range of possible sales targets - rather than only one goal - would be established and evaluated.

The first strategy is to set the selling price of $170 with annual fixed costs at $20,000,000. A number of managers are in favor of this strategy, as they believe it is significant to reduce costs.

Second strategy is to increase spending on advertising and promotions and set the selling price of $200. With higher selling price the annual fixed costs will increase to $25,000,000. The marketing department is adamant which increased emphasis on advertising and promotions is essential.
The table below demonstrates three probable levels of customer demands. The likelihood of reaching a certain level is indicated by estimated probability. Note that it is not essential to create the complex model based on probabilities. Though, the probability distribution provides some guidance for the managers. Don't forget that company has certain minimum expectations of the new product.

Estimated demand (units)    Estimated probability (units)
150,000                                        0.25
180,000                                          0.5
200,000                                        0.25

Additional information:

• The estimate of variable cost per unit is $30.

• The probability of new product achieving break-even is very significant. A profit greater than $4,000,000 is expected.

Required:

• find out break-even at each level.

• Is the company likely to achieve its desired target profit of $4,000,000 or more? Support your discussion with financial analysis.

• find out the margin of safety and describe the meaning of the number derived.

• Should the company go ahead with the new product?

• Will this type of analysis be useful to a large company with the wide range of products?

• ROI (return on investment) and residual income are two other methods that could be helpful for this type of decisions. Can they be applied in this situation? Support your answer with financial analysis.

Modular Case Assignment Expectations

It is significant to answer problems as posed.  The discussion must be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92763

Have any Question? 


Related Questions in Accounting Basics

Additional information1 the company during the year paid

Additional Information 1. The Company during the year paid AED 200,000 for security deposit and bank charges of AED 40. 2. The Warehouse reported inventory stock count of AED 286,500. 3. XYZ Company's confirmation ,( Cus ...

Assessment - written report - individual assessment purpose

Assessment - Written Report - individual assessment Purpose: This assessment is designed to reinforce the subject content and develop students' skills and application of knowledge of the subject content to business situa ...

Accounting questionwhat are the advantages to the

Accounting Question: What are the advantages to the shareholders in a target entity that is acquired via taxable stock acquisition vs. a taxable acquisition of net assets? What are the advantages to the acquiring entity? ...

Task1 create journal entries for the following

Task: 1. Create journal entries for the following transactions. 2. Draw up a T-accounts for each account affected by transactions. 3. Calculate ending balances for all T-accounts. Transactions: March, 1: Student Corp. re ...

Financial paperso the idea is to have the same lenght

Financial Paper So the idea is to have the same lenght, quality and structure. The only thing missing on this paper is a conclusion, that will have to be at least half a page. The company to be compare on the paper will ...

Accountingbulluse the internet to research an annual report

Accounting • Use the Internet to research an annual report of a retail company. • Then, imagine you are an investor or creditor; suggest the ratios that you believe would provide an investor or creditor with the most imp ...

Case study requirementsbullselect an accounting topic of

Case Study Requirements • Select an accounting topic of your choice - this could be revenue recognition, inventory valuation, fair value, stock options, derivatives, investments, segment reporting, leases, just to name a ...

Choose any one of the following topic and express your

Choose any one of the following topic and express your views on the same: Which areas of Agriculture, Food and Animal feed would you focus for syndicated research and why? OR What would it really take to feed the growing ...

Abc stock has a share price of 150 today all rates of

ABC stock has a share price of $150 today. All rates of interest are 3% per annum on a continuously compounded basis. A one-year European call option on one share of stock struck at $147 is worth $15. Finally, ABC is sch ...

Accounting and regulatory environmenti need someone to

Accounting and Regulatory Environment. I need someone to write a paper for me on accounting and the regulatory environment. The instructions are below on what it is to include. In the wake of the accounting and finance s ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro