| Packer Stoves Inc. is designing a commercial style stove for residential use. The team developing the specifications, cost and pricing |
| decisions includes production, accounting, engineering and marketing. The stove includes a warming drawer, broiler unit, and high BTU burner. |
| With these special features Packer Stoves Inc. believes it can sell the stoves for $4,700. Packer Stoves Inc. desires to earn a 25% profit on each |
| stove. Variable costs are $2,900 per stove and fixed costs are $1,800,000. Assume Packer estimates it can sell 3000 stoves. |
| 1 | Using cost+ pricing calculate the price, given the cost and profit information. |
| 2 | Calculate the Target cost per stove. How many stoves must Packer Inc. sell to meet the target cost? |
| 3 | If Packer decides only 2000 stoves can be sold at $4,700 and, therefore, decides to eliminate the broiler |
| | unit thereby saving $650 per stove. With this feature dropped it is estimated that 2,600 units can be sold for $4,000. |
| | Will Packer be able to produce the stove at the new target cost. |
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kari.griffen1.xlsx
