70.2K

Verified Solution

Link Copied!

510 Case Study 1 Vivian Lopez and Loren San will be opening a pastry store called Tasty Desserts. They are opening in two weeks and have still not decided how much to charge for their cakes and how much they should spend on advertisements and promotions. The following information is available: Tasty Dessert's variable costs per cake Tasty Dessert's fixed costs for the year $12,500 Maximum production capacity for the year 5,000 cakes Tasty Dessert's selling price per cake ? Advertising budget ? Competitor's selling price per cake (offer similar cakes as Tasty $20 Dessert's) The two owners had the following discussion regarding the selling price and advertising budget: Vivian: Opening day is in two weeks! Loren, we really need to figure out how much we'll be selling our cakes for and our advertising budget. Loren: As a new store, I think we should charge the same rate as our competitors and advertise our store on the radio and local review blogs. I anticipate that these advertising expenses will increase our fixed costs by $3,000. Vivian: Well, I think the best way to attract customers is to sell our cakes cheaper than anyone else. I'm thinking we should charge 10% lower than our competitor's rate. As for advertising. I don't think we need to spend money on advertisements at all. We can simply create a Facebook group and invite a bunch of friends and families. This way, we will generate more sales. In fact, I think we can potentially increase sales by 1,500 cakes. Loren: I agree that we will probably sell more cakes if we charge 10% lower than our competitors. However, I don't think we will be able cover our fixed costs if we reduce our prices. We should also be concerned with breaking even as quick as possible. Whose suggested strategy should be recommended? Assume that 5,000 cakes will be sold. Case Study 3 Constructed Response Answer Hocus Pocus Company wants to increase sales by adding a new product line. The company is considering three different projects. However, its capital budget is limited to 51.500,000. In addition, the company requires a rate of return of 101 The information concerning the three product lines a given below Broomsticks Magic Wands Crystal Balls $1,170,000 $933.000 52.210,000 Net initial investment Sales Budgeted Income Statement for the next five years $500.000 $450.000 5650,000 Cost of Goods Sold 80,000 50.000 32.000 Gross Margin 420,000 400,000 618,000 Marketing and Administrative Expenses 100,000 130,000 22.000 Net Income > 7 Assume all amounts stated on the budgeted income statement are cash item Required a) Determine the net present value for each project assuming at cash flows cease after five years Case Study 3 Constructed Response Answer.al Which project should Hocus Pocus invest in and why? Case Study 3 Constructed Response Answer b] of Hocus Pocus had a capital budget limit of $2.300.000,how should they investit? Case Study 2 Gordon Sparks Ltd. sells ergonomic chairs. The company implemented a new bonus structure for all of their managers. If net income increased from the previous year, managers would be rewarded with 0.5% of the increase in net income. In January of last year, Mingle Nicholson was hired as the manager of the marketing department. As the marketing manager, he was responsible for seeking external opportunities, managing budgets and understanding the current and potential customers. Every three or four days, Mingle would meet with the sales manager, Logan Freidman. The meeting was usually about past sales, and whether there were changes to the selling strategy. This information was extremely important to Mingle, since he was responsible to ensure the marketing objectives are aligned with the sales objectives. During the year, Mingle made several changes to Gordon Sparks' marketing strategy. Mingle created a set of popular commercials, which were a complete success. Each commercial reached over 5,000,000 views on YouTube However, by the end of that year, Mingle realized that he did not receive a bonus from the company because the company's overall financial performance remained the same. Discuss the appropriateness of the company's bonus policy

Answer & Explanation Solved by verified expert

See Answer