Ask Question, Ask an Expert


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.


• 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

Assessment by the sports exports company of factors that

Assessment by the Sports Exports Company of Factors That Affect the British Pound's Value Because the Sports Exports Company (a U.S. ?rm) re- ceives payments in British pounds every month and converts those pounds into d ...

Accounting questionsinternational accounting focuses on

Accounting Questions: International Accounting focuses on foreign currency and hedging. Why might a company prefer a foreign currency option rather than a forward contract in hedging a foreign currency firm commitment? W ...

1capstone project report word limit 3000 wordsthe report

1.Capstone Project Report (Word Limit: 3000 words) The report should show the followings: • Identification of the professional accounting, management and/or public relations issues in your workplace; • How do you applied ...

Problem-ccc has decided to carry and sell t-shirts with its

Problem- CCC has decided to carry and sell t-shirts with its logo printed on them. Journalize and post the following entries. You may need to create additional T accounts. Note that we will work a whole year's worth of p ...

Question 1problem a if the ceo wants to plan expansion in

Question 1: Problem A If the CEO wants to plan expansion in two new states, which should he choose, and what is the expected total cost?   Declining Same Improving EMV State 0.25 0.4 0.35   Kentucky 22 19 15 18.35 Maryla ...

Accounting principles assignment-q1 smith catering service

Accounting Principles Assignment- Q1. Smith Catering Service completed the following transactions during its first month of operations for July 2016: a. Smith Catering Service commenced operations by receiving $12000 cas ...

1 under gasb rules for the financial reporting entitya

1. Under GASB rules for the financial reporting entity a. component units are included if the primary government is financially accountable for their operations B. counties are component units of the state government C. ...

Fasb codification and careers in accountingplease respond

FASB Codification and Careers in Accounting"Please respond to the following: • Throughout this course you have utilized the FASB codification to research the authoritative guidelines for accounting transactions. Briefly ...

As an auditor for the cpa firm of hinkson and calvert you

As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. LR Corporation is a closely held corporation whose stock is not publicly traded. On December ...

Assignment questionbio-sustainable feeds bsf ltd an

ASSIGNMENT QUESTION Bio-sustainable Feeds (BSF) Ltd., an Australian bio-research firm listed on the Australian Stock Exchange (ASX), has engaged research on sustainable aqua-culture feeds for two decades. Its research on ...

  • 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

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate