Question

Larson, Inc., manufactures backpacks. Last year, it sold 99,000 of its basic model for $15 per unit. The company estimates that this volume represents a 30 percent share of the current market. The market is expected to increase by 15 percent next year. Marketing specialists have determined that as a result of new competition, the company’s market share will fall to 25 percent (of this larger market). Due to changes in prices, the new price for the backpacks will be $12 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. Required: Estimate Larson’s sales revenues from this model of backpack for the coming year.

Offenbach & Son has just made its sales forecasts and its marketing department estimates that the company will sell 219,000 units during the coming year. In the past, management has maintained inventories of finished goods at approximately one month’s sales. The inventory at the start of the budget period is 14,700 units. Sales occur evenly throughout the year.

Required:

Estimate the production level required for the coming year to meet these objectives

Answer 1