TEAM ASSIGNMENT2:PROJECT ANALYSIS SALES PROMOTIONS

Team Assignment 2

Team Assignment 2: Project-Analysis, Sales Promotions
Background
Data
		Glider		Chair with Footstool		Table
		Actual	Budget	Actual	Budget	Actual	Budget
	Number of units	2,600	4,000	6,900	8,000	3,500	3,300
	Average sales price	$80.00	$85.00	$61.00	$65.00	$24.00	$25.00
	Variable costs
	Direct labor:
	Hours	2.50	2.25	3.25	3.00	0.60	0.50
	Cost/hour	$11.00	$10.00	$9.50	$9.25	$9.00	$9.00
	Direct material	$16.00	$15.00	$11.00	$10.00	$6.00	$5.00
	Sales commission	$15.00	$15.00	$10.00	$10.00	$5.00	$5.50
Promotional activity costs:
Hawaiian vacation =				$16,500
Golfing trip =				$12,500
Required
1. Explain whether either contest is desirable or not. Supplement your analysis by determining the total contribution margin for
Gliders and for Table-and-Chair sets under each of the following assumptions: actual sales volume at actual selling price, actual resource
usage, and actual costs; and, actual sales volume at budgeted selling prices, budgeted resource usage, and budgeted costs.
2. Explain the strategic issues guiding your choice about these contests.
Solution

Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by

-

products. Its three

furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost

-

conscious consumers and

those who value the recycling of materials. The company wholesales its products to retailers and various mass merchandisers.

Because of the seasonal nature of the products, most orders are manufactured during the winter months for delivery in the ear

ly

sp

ring. Michael Cain, founder and owner, is dismayed that sales for two of the products are tracking below budget. The followin

g

chart shows pertinent year

-

to

-

date data regarding the company’s products.

Certain that the shortfall was caused by a lack of effo

rt by the sales force, Michael has suggested to Lisa Boyle, the sales

manager, that the company announce two contests to correct this situation before it deteriorates. The first contest is a trip

to Hawaii

awarded to the top salesperson if incremental glid

er sales are attained to close the budget shortfall. The second contest is a golf

weekend, complete with a new set of golf clubs, awarded to the top salesperson if incremental sales of chairs with footstools

are

attained to close the budget shortfall. The

Hawaiian vacation would cost $16,500 and the golf trip would cost $12,500.

Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by-products. Its three

furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost-conscious consumers and

those who value the recycling of materials. The company wholesales its products to retailers and various mass merchandisers.

Because of the seasonal nature of the products, most orders are manufactured during the winter months for delivery in the ear ly

spring. Michael Cain, founder and owner, is dismayed that sales for two of the products are tracking below budget. The followin g

chart shows pertinent year-to-date data regarding the company’s products.

Certain that the shortfall was caused by a lack of effort by the sales force, Michael has suggested to Lisa Boyle, the sales

manager, that the company announce two contests to correct this situation before it deteriorates. The first contest is a trip to Hawaii

awarded to the top salesperson if incremental glider sales are attained to close the budget shortfall. The second contest is a golf

weekend, complete with a new set of golf clubs, awarded to the top salesperson if incremental sales of chairs with footstools are

attained to close the budget shortfall. The Hawaiian vacation would cost $16,500 and the golf trip would cost $12,500.

Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by -products. Its three

furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost -conscious consumers and

those who value the recycling of materials. The company wholesales its products to retailers and various mass merchandisers.

Because of the seasonal nature of the products, most orders are manufactured during the winter months for delivery in the ear ly

spring. Michael Cain, founder and owner, is dismayed that sales for two of the products are tracking below budget. The followin g

chart shows pertinent year -to-date data regarding the company’s products.

Certain that the shortfall was caused by a lack of effo rt by the sales force, Michael has suggested to Lisa Boyle, the sales

manager, that the company announce two contests to correct this situation before it deteriorates. The first contest is a trip to Hawaii

awarded to the top salesperson if incremental glid er sales are attained to close the budget shortfall. The second contest is a golf

weekend, complete with a new set of golf clubs, awarded to the top salesperson if incremental sales of chairs with footstools are

attained to close the budget shortfall. The Hawaiian vacation would cost $16,500 and the golf trip would cost $12,500.