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Answer :
Final answer:
The budgeted sales revenue if the selling price decreases to $10 per hammer is $375,000
Explanation:
The budgeted sales revenue if Hammer Time implements the decrease in selling price is $375,000.
To calculate this, first determine the new estimated sales quantity (12,000 + 5,000 = 17,000 hammers). Then, multiply the new selling price of $10 per hammer by the new estimated sales quantity: $10 x 17,000 = $170,000. Thus, the budgeted sales revenue would be $170,000 x 2 (for both sales transactions per hammer) = $340,000. However, if the original selling price was maintained ($15 x 12,000 = $180,000), the total budgeted sales revenue would have been $180,000 x 2 = $360,000.
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Answer:
The sales revenue would be 170,000 if Hammer Time implements the decrease in selling price.
This would generate a decrease of $10,000 in the sales revenue
Explanation:
Understanding the way sales revenue is generated:
[tex]Units Sold * Unit Price = $Sales Revenue[/tex]
If the selling price drops to $10
and units sold increase by 5,000
[tex](12,000 + 5,000) * ( 15 - 5 ) = 17,000 * 10 = 170,000[/tex]
Comparing with the previous year:
[tex]12,000 * 15 = 180,000[/tex]
This policy decrease the sales revenue which makes the business less profitable.
