Reference no: EM133529347

Question: Bob Allison imports roses from California for direct distribution to customers in Ottawa. Five sales people sell the roses to shoppers in malls on Thursdays, Fridays, and Saturdays and receive 10% of the $2 selling price. Each rose costs $0.35 from the supplier. Air freight costs $0.15 a rose, while customs duty costs $0.15 a rose. Provincial tax laws require that 7% of the selling price be remitted to the government. Mr. Allison absorbs this cost rather than passing it on to his customers. Fifteen percent of the roses received are damaged and thus cannot be sold. Other expenses include $325 for the sales manager's weekly salary, $500 a week for promotion (newspaper ads and posters) and $100 a week for gas and maintenance on the company car. The automobile has just been purchased for $9360 and it is expected to last three years. For accounting purposes, Mr. Allison uses the straight-line depreciation method. Mr. Allison, who earns $30 000 a year, spends 20% of his time with the rose project and he allocates this cost accordingly to that project. He hopes the company can earn $1000 a week before tax. He wonders how many roses he must sell to break even, how many to make the $1000 profit, and how many to order if he expects to sell at that profit target level. (Use a 52 week year.)