In: Accounting
Applehead Technology is a company that purchases a device called the EyePod from a supplier and then sells the devices to retail customers. If the company makes no changes in its operations, the company expects the following for the coming year.
# of units sold 30,000
Price $300 per unit
Cost of merchandise $100 per unit
Rent and Salaries for the year $1,300,000
The company is holding a meeting to discuss ways to increase its profit – that is the company’s goal. At that meeting, Maria Garcia, the marketing manager, says “If we make the changes I suggest, I think we can attract more customers and increase our share of the market. Currently, our customers pay for shipping. Market research says customers hate shipping charges, so rather than having customers pay it, we should pay it. Shipping would cost us $3 per unit. Market research also shows that our prices are not competitive. So, we should lower our price to $270. If we take these actions, I estimate we will increase the number of units sold to 32,000.”
Answer the following questions on the separate answer sheet labeled “For Problem 3b, c, d, e”: