In 2017, Lippart & Sons, a small environmental-testing firm, performed 11,000 radon tests for $330 each and 15,000 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 15% next year. However, awareness of radon-related health hazards is expected to result in a 7% increase in radon-test volume each year in the near future. Jim Lippart feels that if he lowers his price for lead testing to $220 per test, he will have to face only a 4% decline in lead-test sales in 2018.Required:a. Prepare a 2018 sales budget for Hart & Sons assuming that Hart holds prices at 2017 levels. b. Prepare a 2018 sales budget for Hart & Sons assuming that Hart lowers the price of a lead test to $200.

1.Radon Tests $3,884,100

Lead Tests $3,060,000

2.Radon Tests $3,884,100

Lead Tests $2,880,000

Explanation:

1.Preparation for 2018 sales budget for Hart & Sons

Lippart & Sons, 2017 Volume At 2017; Selling Prices

Radon Tests 11,000 $330

Lead Tests 15,000 $240

2018 Expected Change in Volume

Radon Tests 11,000 +7%

Lead Tests 15,000 -15%

Expected 2018 Volume

Radon Tests 11,000 *7% =$770

(11,000 +770)=$11,770

Lead Tests 15,000 *15%=$2,250

15,000-2,250=$12,750

Lippart & Sons Sales Budget For the Year Ended December 31,2018

Selling Price ×Units Sold = Total Revenues

Radon Tests 11,770*330=$3,884,100

Lead Tests 12,750*240=$3,060,000

2.1.Preparation for 2018 sales budget for Hart & Sons

Lippart & Sons, 2017 Volume At 2017; Selling Prices

Radon Tests 11,000 $330

Lead Tests 15,000 $200

2018 Expected Change in Volume

Radon Tests 11,000 +7%

Lead Tests 15,000 -4%

Expected 2018 Volume

Radon Tests 11,000 *7% =$770

(11,000 +770)=$11,770

Lead Tests 15,000 *4%=$600

15,000-600=$14,400

Lippart & Sons Sales Budget For the Year Ended December 31,2018

Selling Price ×Units Sold = Total Revenues

Radon Tests 11,770*330=$3,884,100

Lead Tests 14,400*200=$2,880,000

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