Polynesia Company Manufactures Sonars for Fishing Boats The Sales Manager Says He Has an Opportunity to Pitch

question 21

True/False

Polynesia Company manufactures sonars for fishing boats. Model 70 sells for $300. Polynesia produces and sells 5,500 of them per year. Cost data are as follows:
$$\begin{array} { | l | r | r|} \hline \text { Variable manufacturing } & \$ 100&\text { per unit } \\\hline \text { Variable marketing } & \$ 15&\text { per unit } \\\hline \text { Fixed manufacturing } & \$ 280,000 &\text { per year } \\\hline \text { Fixed marketing \& admin } & \$ 150,000 &\text { per year } \\\hline\end{array}$$ The sales manager says he has an opportunity to pitch a special sale to a new Canadian fishing company that is outfitting new boats. He proposes a sale of 40 units at a special price of $150 per unit. He says it will not cannibalize the company's regular sales and is a one-time transaction. It will require the normal amount of variable costs, both marketing and manufacturing, but will not impact fixed costs in any way. The president of the company has some reservations, but finally agrees to make the deal if and only if it adds a minimum of $1,500 to operating income. Based on the president's criteria, Polynesia will decline the offer.

---

Definitions:

Channels of Distribution

Paths through which goods and services travel from the producer to the consumer or the user of the product.

Global Marketing

A strategy that plans and coordinates the promotion and distribution of goods and services in international markets to meet consumers' needs globally.

Product Extension

The practice of introducing additional versions of a product to the market, often featuring new flavors, sizes, or functionalities to cater to different consumer preferences.

Global Marketing

Marketing strategies designed to capitalize on global market opportunities, necessitating an understanding of various cultural, legal, and economic factors.