All the questions in this set are based on the data presented below for Costs and Expenses and in the Bates Tubs P & L Statement for 2009 table.
Use this data to answer the question shown below.
NOTE: It is a good idea to write down your answers for the "5000" columns of the table and keep them handy because you will need those numbers to help fill in the answers for the "Sales Rev" column.
Mr. Ted Bates formed the Leisure Life Products Company to manufacture and market a line of wooden hot tubs. After designing and testing a working model, Mr. Bates estimated the following costs for the first year of operation:
Costs and Expenses
Manufacturing overhead $50,000
Marketing support costs $50,000
Direct manufacturing costs per hot tub $200
Direct distribution cost per hot tub $100
Mr. Bates did not do any product concept testing or pricing research to check out consumer interest in his hot tub or what they would be willing to pay. Rather, Bates based his discussions with a few friends, the first year.
One friend suggested that a mass market might exist if Bates lowered his selling price. By doing so he might also discourage competitors from entering the wooden hot tub niche category. He estimated that he could sell 500 tubs a year if he set the retail price at $600 per tub.
BATES TUBS P & L STATEMENT FOR 2009
Year 1 Estimate Year 1 Estimate
at $1000 per tub at $600 per tub
5000 % Sales Rev 5000 % Sales Rev
Sales Revenue 100.0 100.0
Fixed Costs
Variable Costs
Expenses
Net Profit ??
QUESTION:
What is the Year 1 Estimate at $600 per tub for %Sales Revenue for the Net Profit?
16.7
20
30
