Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four: Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.Which option is preferred?

Question

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four:  Cut the price to $60 per game and possibly sell 20,000 units.
-Refer to the figure.Which option is preferred?

Quizplus · Accepted Answer

The Answer is C

Anderson Company Manufactures a Variety of Toys and Games