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Author Question: In 2014, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for 290 ... (Read 58 times)

jCorn1234

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on: Jul 6, 2018
In 2014, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for 290 each and 16,400 lead tests for 240 each.
 
  Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10 next year. However, awareness of radon-related health hazards is expected to result in a 6 increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to 230 per test, he will have to face only a 7 decline in lead-test sales in 2015.
 
  Required:
  1. Prepare a 2015 sales budget for Rouse & Sons assuming that Rouse holds prices at 2014 levels.
  2. Prepare a 2015 sales budget for Rouse & Sons assuming that Rouse lowers the price of a lead test to 230. Should Rouse lower the price of a lead test in 2015 if the company's goal is to maximize sales revenue?

Question 2

Which of the following is correct, assuming the following transaction: R. Dirk invested 20,000 cash in the business.
 a. Cash is debited.
  b. Cash is credited.
  c. R. Dirk, Capital is debited.
  d. Income from Services is credited.


uniquea123

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Reply #1 on: Jul 6, 2018
Answer to Question 1

1.
Rouse & Sons 2014 Volume At 2014
Selling Prices Expected 2015
Change in Volume Expected 2015 Volume
Radon Tests 12,200 290 + 6 12,932
Lead Tests 16,400 240 10 14,760

Rouse & Sons Sales Budget
For the Year Ended December 31, 2015

Selling Price Units Sold Total Revenues
Radon Tests 290 12,932 3,750,280
Lead Tests 240 14,760 3,542,400
7,292,680

2.
Rouse & Sons 2014 Volume Planned 2015 Selling Prices Expected 2015 Change in Volume Expected 2015 Volume
Radon Tests 12,200 290 +6 12,932
Lead Tests 16,400 230 7 15,252

Rouse & Sons Sales Budget
For the Year Ended December 31, 2015

Selling Price Units Sold Total Revenues
Radon Tests 290 12,932 3,750,280
Lead Tests 230 15,252 3,507,960
7,258,240

Expected revenues at the new 2015 prices are 7,258,240, which is lower than the expected 2015 revenues of 7,292,680 if the prices are unchanged. So, if the goal is to maximize sales revenue and if Jim Rouse's forecasts are reliable, the company should not lower its price for a lead test in 2015.

Answer to Question 2

A


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jCorn1234

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Reply #2 on: Jul 6, 2018
Thank you


uniquea123

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Reply #3 on: Jul 6, 2018
No problemo


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