Question

Pataky Co.’s sales manager estimates that 4,000,000 units of product RI#698 will be sold during the year. The product’s selling price is expected to decline as the result of technology changes during the year and estimates of the sales price are as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter $17 $16 $14 $12 In talking with customers, the sales department discovered that sales quantities per quarter could vary substantially. Thus, the sales manager has prepared the following three sets of quarte

Answer 1

This business question involves analyzing sales forecasts and the effect of pricing changes on revenue and costs. Examples include the change in revenue as the price of frozen raspberries doubles and profitability analysis when prices fall below production costs.

Step-by-step explanation:

The question pertains to predicting sales and analyzing the impact of price changes on a company's revenue and costs in the context of a Business or Economics study. It discusses how a company forecasts sales based on varying unit prices due to technological changes over different quarters of a year. By analyzing factors such as price-to-sales relationships and cost structures, the company seeks to understand the implications for revenue and profitability.

With the example of the frozen raspberries, where the price doubles to $8 per pack, the direct proportionality of price and sales revenue can be seen: one pack sells for $8, two packs for $16, and so on. This forms the basis for total revenue calculations. However, when the price falls to $2 per pack, the analysis involves comparing total revenue with total costs. The aim is to determine profitability, illustrated by rectangles showing total revenue and total costs. A loss is indicated if total revenue is less than total cost, resulting in a 'negative profit' represented by a rose-shaded rectangle.