Multiple Changes in Profit Plans In an attempt to improve profit performance, Anderson Companys management is considering a number of alternative actions. An October contribution income statement for Anderson Company follows.

a. Purchasing automated assembly equipment, which should reduce direct labor costs by $4 per unit and increase variable overhead costs by $1 per unit and fixed factory overhead by $9,600 per month.

b. Reducing the selling price by $5 per unit. This should increase the monthly sales by 2,400 units. At this higher volume, additional equipment and salaried personnel would be required. This will increase fixed factory overhead by $3,200 per month and fixed selling and administrative costs by $1,440 per month.

c. Buying rather than manufacturing a component of Andersons final product. This will increase direct materials costs by $5 per unit. However, direct labor will decline $3 per unit, variable factory overhead will decline $1 per unit, and fixed factory overhead will decline $20,000 per month.

d. Increasing the unit selling price by $5 per unit. This action should result in a 1,600 unit decrease in monthly sales.

e. Combining alternatives (a) and (d).

ANDERSON COMPANY Contribution Income Statement For Month of October ANDERSON COMPANY Contribution Income Statement For Month of October