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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 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 $109. 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 $172,000 with a unit selling price of $109? Answer units

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(a) 2010 P.U. 2010
Sales   *134 2412000 reuired (1350000+1062000)
COGS 48 864000
Sellling & Distribution 11 198000
Total Variable Cost (b) 59 1062000
Contribution (b/a) 75 1350000 required (858000+320000+172000)
Fixed Cost
Manufacturing O/H 858000
Admin 320000
Profit 172000
* 2412000/18000 = $134
24000 Units
(b) 2010 P.U. 2010
Sales   109 2616000
COGS 40 960000
Sellling & Distribution 11 264000
Total Variable Cost (b) 51 1224000
Contribution (b/a) 58 1392000
Fixed Cost
Manufacturing O/H 750000
Admin 320000
Profit 322000
Notw: if we consider manufacturing cost remain then profit will be 322000
*27000 Units
(c) 2010 P.U. 2010
Sales   109 2943000
COGS 48 1296000
Sellling & Distribution 11 297000
Total Variable Cost (b) 59 1593000
Contribution (b/a) 50 1350000 required (858000+320000+172000)
Fixed Cost
Manufacturing O/H 858000
Admin 320000
Profit 172000
*Sales Volume = Contribution / Contribution p.u.
(1350000/50) = 27000 Units

ekkarill92 answered 1 year ago
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