Presented is the 2012 contribution income statement of Colgate products Sales (12,000) $1,440,000 Less variable cost Cost of goods sold $480,000 Selling and admin 132,000 Contribution margin 828,000 Less fixed costs Manufacturing overhead 520,000 Selling and admin 210,000 Net income 98,000 During t...

A Last years sale price per unit 144000012000 120 per unit Increase ...

Presented is the 2012 contribution income statement of Colgate products. Sales (12,000)..........................$1,440,000 Less variable cost Cost of

Question:

Presented is the 2012 contribution income statement of Colgate products.
Sales (12,000)..........................$1,440,000
Less variable cost
Cost of goods sold..................$480,000
Selling and admin........................132,000
................... 828,000
Less fixed costs
Manufacturing overhead.............520,000
Selling and admin........................210,000
Net income.................................... 98,000
During the coming year, Colgate expects an increase in variable manufacturing of $8 per unit and in fixed manufacturing costs of $48,000.
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 $107. Is this action desirable?
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 $107?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...