Question

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	510,000
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 for 2010 remain at 12,000 units, what price should Colgate charge to obtain the same profit as last year?
$______

(b) Management believes that sales can be increased to 16,000 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.
______

(c) After considering the expected increases in costs, what sales volume is needed to earn a profit of $98,000 with a unit selling price of $109?
_____

Answer 1