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In: Accounting
Product Pricing: Single Product Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS...
Product Pricing: Single Product
Presented is the 2009 contribution income statement of Colgate
Products.
| COLGATE PRODUCTS Contribution Income Statement For Year Ended December 31, 2009 |
||
|---|---|---|
| Sales (6,000 units) | $720,000 | |
| Less variable costs | ||
| Cost of goods sold | $240,000 | |
| Selling and administrative | 66,000 | (306,000) |
| Contribution margin | 414,000 | |
| Less fixed costs | ||
| Manufacturing overhead | 290,000 | |
| Selling and administrative | 90,000 | (380,000) |
| Net income | $34,000 | |
During the coming year, Colgate expects an increase in variable
manufacturing costs of $6 per unit and in fixed manufacturing costs
of $24,000.
(a) If sales for 2010 remain at 6,000 units, what price should
Colgate charge to obtain the same profit as last year?
____
(b) Management believes that sales can be increased to 8,000 units
if the selling price is lowered to $105. What would be the excepted
profit (or loss) as a result of this action? Use a negative sign
with your answer, if appropriate.
____
(c) After considering the expected increases in costs, what sales
volume is needed to earn a profit of $34,000 with a unit selling
price of $105?
____ units
Solutions
Expert Solution
Answer (A)
| Profit | 34,000 | ||
| Add : Fixed Cost | |||
| Selling & Administrative | 90,000 | ||
| Manufacturing overhead | (290,000+24000) | 3,14,000 | |
| Contribution Margin | 4,38,000 | ||
| Add : Variable Cost | |||
| Cost of goods sold | (240000+6000*6) | 2,76,000 | |
| Selling & Administrative | 66,000 | ||
| Sales | 7,80,000 | ||
| No. of Units | 6,000 | ||
| Sales price per unit | 130 |
Answer (B)
| Sales | (8000*105) | 8,40,000 | |
| Less : Variable Cost | |||
| Cost of goods sold | (276000*8000/6000) | 3,68,000 | |
| Selling & Administrative | (66000*8000/6000) | 88,000 | |
| Contribution Margin | 3,84,000 | ||
| Less : Fixed Cost | |||
| Selling & Administrative | 90,000 | ||
| Manufacturing overhead | (290,000+24000) | 3,14,000 | |
| Profit | -20,000 |
Answer (C)
| Profit | 34,000 | ||
| Add : Fixed Cost | |||
| Selling & Administrative | 90,000 | ||
| Manufacturing overhead | (290,000+24000) | 3,14,000 | |
| Contribution Margin | 4,38,000 |
From the table above, Contribution shall be 438000.
If the number of unit is 'x',
The variable cost shall be 46 (276000/6000) + 11 (66000/6000) = $57
At a sale price of 105 per unit, sales shall be - 105x
now, the total variable cost shall be - 57x
We know, Total Variable cost = Total Sales - Contribution Margin.
Solving the equation 57x = 105x - 438000
105x - 57x = 438000
48x = 438000
x = 9125.
Thus, the number of unit shall be 9125.
ekkarill92 answered 2 years agoRelated Solutions
Product Pricing: Single Product Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS...
Product Pricing: Single Product
Presented is the 2009 contribution income statement of Colgate
Products.
COLGATE PRODUCTS
Contribution Income Statement
For Year Ended December 31, 2009
Sales (18,000 units)
$2,160,000
Less variable costs
Cost of goods sold
$720,000
Selling and administrative
198,000
(918,000)
Contribution margin
1,242,000
Less fixed costs
Manufacturing overhead
770,000
Selling and administrative
340,000
(1,110,000)
Net income
$132,000
During the coming year, Colgate expects an increase in variable
manufacturing costs of $6 per unit and in fixed manufacturing costs...
Product Pricing: Single Product Presented is the 2014 contribution income statement of Colgate Products. COLGATE PRODUCTS...
Product Pricing: Single Product
Presented is the 2014 contribution income statement of Colgate
Products.
COLGATE PRODUCTS
Contribution Income Statement
For Year Ended December 31, 2014
Sales (13,000 units)
$ 1,560,000
Less variable costs
Cost of goods sold
$ 520,000
Selling and administrative
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Contribution margin
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Less fixed costs
Manufacturing overhead
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Selling and administrative
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Net income
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During the coming year, Colgate expects an increase in variable
manufacturing costs of $8 per unit and in...
Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS Contribution Income Statement For...
Presented is the 2009 contribution income statement of Colgate
Products.
COLGATE PRODUCTS
Contribution Income Statement
For Year Ended December 31, 2009
Sales (12,000 units)
$1,440,000
Less variable costs
Cost of goods sold
$480,000
Selling and administrative
132,000
(612,000)
Contribution margin
828,000
Less fixed costs
Manufacturing overhead
530,000
Selling and administrative
200,000
(730,000)
Net income
$98,000
Next year, Colgate expects an increase in variable manufacturing
costs of $6 per unit and in fixed manufacturing costs of
$48,000.
(a) If sales for...
Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS Contribution Income Statement For...
Presented is the 2009 contribution income statement of Colgate
Products.
COLGATE PRODUCTS Contribution Income Statement For Year Ended
December 31, 2009
Sales (18,000 units) $2,160,000
Less variable costs Cost of goods sold $720,000 Selling and
administrative 198,000 (918,000)
Contribution margin 1,242,000
Less fixed costs Manufacturing overhead 750,000 Selling and
administrative 320,000 (1,070,000)
Net income $172,000
During the coming year, Colgate expects an increase in
variable manufacturing costs of $8 per unit and in fixed
manufacturing costs of $108,000.
(a) If...
Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS Contribution Income Statement For...
Presented is the 2009 contribution income statement of Colgate
Products. COLGATE PRODUCTS Contribution Income Statement For Year
Ended December 31, 2009 Sales (18,000 units) $2,160,000 Less
variable costs Cost of goods sold $720,000 Selling and
administrative 198,000 (918,000) Contribution margin 1,242,000 Less
fixed costs Manufacturing overhead 750,000 Selling and
administrative 320,000 (1,070,000) Net income $172,000 During the
coming year, Colgate expects an increase in variable manufacturing
costs of $8 per unit and in fixed manufacturing costs of $108,000.
(a) If...
Product Pricing: Single Product Presented is the 2017 contribution income statement of Grafton Products. GRAFTON PRODUCTS...
Product Pricing: Single Product
Presented is the 2017 contribution income statement of Grafton
Products.
GRAFTON PRODUCTS
Contribution Income Statement
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Sales (13,000 units) ....................................
$2,925,000
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Cost of goods sold ...................................
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780,000
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315,000
(1,095,000)
Net income ........................................... $
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During the coming year, Grafton expects an increase in variable
manufacturing costs of $12 per unit...
Below is the 2009 contribution income statement of a company. Contribution Income Statement For Year Ended...
Below is the 2009 contribution income statement of a
company.
Contribution Income Statement
For Year Ended December 31, 2009
Sales (12,000 units)
$1,440,000
Less variable costs
Cost of goods sold
$480,000
Selling and administrative
132,000
(612,000)
Contribution margin
828,000
Less fixed costs
Manufacturing overhead
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Selling and administrative
220,000
(730,000)
Net income
$98,000
During the coming year, the company expects an increase in
variable manufacturing costs of $8 per unit and in fixed
manufacturing costs of $72,000.
(a) If sales...
Discuss contribution margin, what it is and how it is presented in the CVP income statement
Discuss contribution margin, what it is and how it is presented
in the CVP income statement
In a multi-product contribution margin income statement, how can you calculate the revenues for a product...
In a multi-product contribution margin income statement, how can
you calculate the revenues for a product where the only information
you have is the variable cost per unit? Also, how to find the sales
ratios for each product?
1. a) The contribution income statement specifically identifies the contribution margin within the income statement. How...
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