1. The sales department has pitched the idea to the owner that increasing the annual sponsorship to $15,000 will increase their sales to a total of 500 canoes per year and they will hit a profit of $150,000. You are working in the finance department and the owner has asked you to explain if the sales department is correct or not. (1) What is total difference between the sales department projected profit of $150,000 and your calculation of the profit? (2) If there is a difference then why is sales amount different? (3) Should the owner increase the annual sponsorship spending and WHY? Current Costs: 450 current canoe sales $800 selling price per canoe $400 variable cost per canoe $50,000 fixed cost
1.
The sales department has pitched the idea to the owner that increasing the annual sponsorship to $15,000 will increase their sales to a total of 500 canoes per year and they will hit a profit of $150,000. You are working in the finance department and the owner has asked you to explain if the sales department is correct or not.
(1) What is total difference between the sales department projected profit of $150,000 and your calculation of the profit?
(2) If there is a difference then why is sales amount different?
(3) Should the owner increase the annual sponsorship spending and WHY?
Current Costs:
450 current canoe sales
$800 selling price per canoe
$400 variable cost per canoe
$50,000 fixed cost
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