Question

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 of $72,000.

(a) If sales for 2010 remain at 18,000 units, what price should Colgate charge to obtain the same profit as last year?
$Answer

(b) Management believes that sales can be increased to 24,000 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.
Answer

(c) After considering the expected increases in costs, what sales volume is needed to earn a profit of $132,000 with a unit selling price of $105?
Answer units

Answer 1