the coming year, Colgate expects an increase in variable manufacturing costs of
Product Pricing: Single Product
Presented is the 2009 contribution income statement of Colgate Products.
| 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 | 530,000 | |
| Selling and administrative | 200,000 | (730,000) |
| Net income | $98,000 |
During the coming year, Colgate expects an increase in variable manufacturing costs of $6 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?
Answer:
(b) Management believes that sales can be increased to 16,000 units if the selling price is lowered to $105. What would be the excepted profit (or loss) as a result of this action? Use a negative sign with your answer, if appropriate.
Answer:(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 $105?
Answer: _____ units
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Rating:
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Solution: the coming year, Colgate expects an increase in variable manufacturing costs of