Problem 2 The Income Statement for the Woodstock Company for the past year is: Sales (150,000...

 

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Problem 2 The Income Statement for the Woodstock Company for the past year is: Sales (150,000 units @30) 4,500,000 Cost of goods sold: Materials Labor Variable factory overhead Fixed factory overhead Gross Profit Variable marketing expenses Fixed marketing expenses Fixed manufacturing expenses Income before income tax Income tax Net income 1,050,000 1,500,000 450,000 500,000 135,000 185,000 180,000 3,500,000 1,000,000 500,000 500,000 250,000 250,000 Woodstock is preparing its budget for the coming year and has made the following projections about cost increases: materials, 5%; labor, 8%; and all other costs (including fixed), 6%. Production capacity is 200,000 units. The President has been offered various proposals by the division manager as follows: 1. Maintain the present volume and sales price. 2. Produce and sell at capacity and reduce the unit price to P28. 3. Raise the unit price to P32, spend an extra P300,000 on advertising, and produce and sell 180,000 units. Required. Recommended action based on the quantification of alternatives. (10 points each alternative Problem 2 The Income Statement for the Woodstock Company for the past year is: Sales (150,000 units @30) 4,500,000 Cost of goods sold: Materials Labor Variable factory overhead Fixed factory overhead Gross Profit Variable marketing expenses Fixed marketing expenses Fixed manufacturing expenses Income before income tax Income tax Net income 1,050,000 1,500,000 450,000 500,000 135,000 185,000 180,000 3,500,000 1,000,000 500,000 500,000 250,000 250,000 Woodstock is preparing its budget for the coming year and has made the following projections about cost increases: materials, 5%; labor, 8%; and all other costs (including fixed), 6%. Production capacity is 200,000 units. The President has been offered various proposals by the division manager as follows: 1. Maintain the present volume and sales price. 2. Produce and sell at capacity and reduce the unit price to P28. 3. Raise the unit price to P32, spend an extra P300,000 on advertising, and produce and sell 180,000 units. Required. Recommended action based on the quantification of alternatives. (10 points each alternative

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1 2 3 Working notes Materials Labor Variable factory overhead Variable marketing expenses Total is d... View the full answer