The Variable Speed Company manufactures a line of high quality tools. The company sold 1,000,000 hammers at a price of $4 per unit last year. The company estimates that this volume represents a 20% share of the current hammers market. The market is expected to increase by 5%. Marketing specialists have determined that, as a result of a new advertising campaign and packaging, the company will increase its share of this larger market to 24%. Due to changes in prices, the new price for the hammer will be $4.30 per unit. This new price is expected to be in line with the competition and have no effect on the volume estimates. What are the estimated sales revenues in the coming year?
A) $5,040,000.
B) $5,160,000.
C) $5,418,000.
D) $5,689,000.

Question

Quizplus · Accepted Answer

The total market size is expected to increase by 5%, so the new market size is 1,000,000 / 0.20 * 1.05 = 5,250,000 hammers. The company's new market share is 24%, so they will sell 5,250,000 * 0.24 = 1,260,000 hammers. At $4.30 per hammer, the estimated sales revenue is 1,260,000 * $4.30 = $5,418,000.

The Variable Speed Company Manufactures a Line of High Quality