Profitability Analysis of “bobby Bully”

Objective The objective of this report is to analyze the profitability potential of “Bobby Bully” and evaluate several decisions made by the Controller of the Company. Profitability analysis of “Bobby Bully” 2.1 Sales unit projections to U.S. purchasersSchedule of expected sales provided by the marketing department assumes 70% of sales to domestic purchasers and 30% to U.S. purchasers. BML has fairly recently escalated its sales in the U.S. to the extent that almost 30% of its sales, up from 5% the preceding year. Such growth in sales is reasonably foreseen in the near future. The assumption made by the marketing department appears conservative. The total sales in units to U.S. purchasers should be more than estimated if incorporate the fact market share in U.S. will continue growing. 2.2 Sales unit projections using expected valuesIn calculation of projected sales in units, the sales unit projections corresponding to the highest probability of occurrence are used in the Controller’s profitability analysis. This assumption tends to overestimate the projections. A more appropriate method of predicting a discrete random variable is to use the expected value, the probability-weighted average of all possible values. Under this method, the projected sales in units is 12,000 if the selling price is $20, 18,500 if $18, 22,500 if $16, and 43,000 if $15.