Modest ventures has a single product

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Reference no: EM131293756

Modest Ventures has a single product: Widget Ultra. It has a stable, not particularly dynamic, annual market demand of 1000 units.

The marketing department feels that an increase in advertising levels would help increase customer awareness, and, therefore, unit sales.

The Widget Ultra typically sells for $5.00. Senior management has been advised by its competitive intelligence unit that several new products are going to be launched which might very well prove effective substitutes for the Widget Ultra, making sales prediction problematic but critical.

Our job is to analyze the situation and report to the senior management committee our findings and recommendation(s). Including detailed pro forma financial statement projections reflecting the several uncertainties confronting Modest.

Material at standard amounts to 3/4 of a pound of the sole raw material which has sold recently for between $1.10 and $1.49 per pound.

The WU requires 15 minutes labor which is fixed by union contract at $8.00 per hour -- the union has been threatening a job-action over recent out-sourcing discussions with two offshore manufacturers. Sales commissions are currently set at 1.5% of gross sales, though there is some talk of basing them on gross profit at a higher percentage. General and Administrative expenses have hovered around $250 and and $175, respectively, for years. Overhead has been applied on the basis of direct labor at a rate of 22%.

Reference no: EM131293756

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