Alpine, Inc., has been experiencing losses for some time, as shown by its most recent income statement:

ALPINE, INC.

Income Statement

For the year ended June 30, 2012

Sales (40,000 Units at $12) $480,000

Less: Cost of Goods Sold

Direct Materials $120,000

Direct Labor 65,600

Manufacturing Overhead 90,000 275,600

Gross Margin 204,400

Less: Operating expenses:

Selling expenses:

Variable:

Sales Commissions $38,400

Shipping 14,000 52,400

Fixed (Advertising, salaries) 110,000

Administrative expenses:

Variable (billing, other) 3,200

Fixed (salaries, other) 85,000 250,600

Net Loss $(46,200)

All variable expenses in the company vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable manufacturing overhead is 50 cents per unit. The company%u2019s plant has a capacity of 70,000 units.

Management is particularly disappointed with 2012%u2019s operating results. Several possible courses of action are being studied to determine what should be done to make 2013 profitable.

1. Redo Alpine, Inc.%u2019s 2012 Income Statement in the contribution format. Show both a total column and a per unit column on your statement

2. Refer to the data. Micah Patdu, the president thinks it would be unwise to change the selling price. Instead, she wants to use less costly materials in manufacturing units of product, thereby reducing costs by $1.73 per unit. How many units would have to be sold during 2013 to earn a target profit of $59,000 for the year?

3.in an effort to make 2012 profittable, micah patdu, the president is considering two proposals perpared by members of her staff:

A: Jon michael, the sales manager would like to reduce the unit selling price by 25 percent. He is certain that this would fill the plant to capacity.

B: Mary Wilkinson, the executive vice president would like to increase that unit selling price by 25 percent,increase that sales commission tto 12 percentof sales, and increasa advertising by$90,000. Based on experience in another company, sheis confident thia would trigger a 50 percent increase in unit sales.