Product Pricing: Single Product (LO2)
Presented is the 2014 contribution income statement of ColgateProducts.
COLGATE PRODUCTS
Contribution Income Statement
For Year Ended December 31, 2014
Sales (13,000 units) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . $1,560,000
Less variable costs
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . $520,000
Selling and administrative. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 143,000
(663,000)
Contribution margin . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 897,000
Less fixed costs
Manufacturing overhead. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 520,000
Selling and administrative. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 210,000
(730,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . $ 167,000
During the coming year, Colgate expects an increase in variablemanufacturing costs of $8 per unit and
in ?xed manufacturing costs of $35,000.
Required
a. If sales for 2015 remain at 13,000 units, what price shouldColgate charge to obtain the same pro?t
as last year?
b. Management believes that sales can be increased to 16,000units if the selling price is lowered to
$107. Is this action desirable?
c. After considering the expected increases in costs, what salesvolume is needed to earn a pro?t of
$167,000 with a unit selling price of $107?
Product Pricing: Single Product (LO2)
Presented is the 2014 contribution income statement of ColgateProducts.
COLGATE PRODUCTS
Contribution Income Statement
For Year Ended December 31, 2014
Sales (13,000 units) . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . $1,560,000
Less variable costs
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . $520,000
Selling and administrative. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 143,000
(663,000)
Contribution margin . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 897,000
Less fixed costs
Manufacturing overhead. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 520,000
Selling and administrative. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 210,000
(730,000)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . $ 167,000
During the coming year, Colgate expects an increase in variablemanufacturing costs of $8 per unit and
in ?xed manufacturing costs of $35,000.
Required
a. If sales for 2015 remain at 13,000 units, what price shouldColgate charge to obtain the same pro?t
as last year?
b. Management believes that sales can be increased to 16,000units if the selling price is lowered to
$107. Is this action desirable?
c. After considering the expected increases in costs, what salesvolume is needed to earn a pro?t of
$167,000 with a unit selling price of $107?
Related questions
Presented is the 2017 contribution income statement of Grafton Products.
| GRAFTON PRODUCTS Contribution Income Statement For Year Ended December 31, 2017 | ||
|---|---|---|
| Sales (13,000 units) | $ 2,925,000 | |
| Less variable costs | ||
| Cost of goods sold | $ 780,000 | |
| Selling and administrative | 208,000 | (988,000) |
| Contribution margin | 1,937,000 | |
| Less fixed costs | ||
| Manufacturing overhead | 780,000 | |
| Selling and administrative | 315,000 | (1,095,000) |
| Net income | $ 842,000 | |
During the coming year, Grafton expects an increase in variable manufacturing costs of $12 per unit and in fixed manufacturing costs of $39,000.
(a) If sales for 2018 remain at 13,000 units, what price should Grafton charge to obtain the same profit as last year? Round to the nearest cent.
$Answer
(b) Management believes that sales can be increased to 16,000 units if the selling price is lowered to $200. 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 $254,800 with a unit selling price of $200? Round to the nearest unit.
Answer
0.00 points out of 1.00
Brock Company produces and sells an industrial product. Thecompany has just opened a new plant to manufacture the product, andthe following cost and revenue data have been provided for thefirst month of the plantâs operation.
| Beginning inventory | 0 | |
| Units produced | 46,000 | |
| Units sold | 41,000 | |
| Selling price per unit | $ | 80 |
| Selling and administrative expenses: | ||
| Variable per unit | $ | 4 |
| Fixed (total) | $ | 563,000 |
| Manufacturing costs | ||
| Direct materials cost per unit | $ | 17 |
| Direct labor cost per unit | $ | 6 |
| Variable manufacturing overhead cost perunit | $ | 3 |
| Fixed manufacturing overhead cost(total) | $ | 874,000 |
| Required: |
| 1. | Assume that thecompany uses absorption costing. |
| a. | Determine theunit product cost. |
| Unitproduct cost | $ |
| b. | Prepare an income statement for the month. (Input allamounts as positive values except losses which should be indicatedby a minus sign.) |
| Absorption Costing Income Statement | |
| (Click to select)Selling and administrativeexpensesSalesGross marginCost of goods manufacturedNet operatingincome (loss) | $ |
| (Click to select)SalesNet operating income (loss)Costof goods soldSelling and administrative expensesGross margin | |
| (Click to select)Contribution marginGross margin | |
| (Click to select)Gross marginNet operating income(loss)Selling and administrative expensesSalesCost of goodssold | |
| (Click to select)Net operating lossNet operatingincome | $ |
| 2. | Assume that thecompany uses variable costing. |
| a. | Determine theunit product cost. |
| Unitproduct cost | $ |
| b. | Prepare a contribution format income statement for the month.(Input all amounts as positive values except losses whichshould be indicated by a minus sign.) |
| Variable Costing Income Statement | ||
| (Click to select)Variable cost of goods soldVariableselling and administrative expensesContribution marginFixedmanufacturing overheadFixed selling and administrative expensesNetoperating income (loss)Sales | $ | |
| Variable expenses: | ||
| (Click to select)Netoperating income (loss)Fixed manufacturing overheadSalesVariableselling and administrative expensesVariable cost of goodssoldContribution marginFixed selling and administrativeexpenses | $ | |
| (Click to select)Fixedmanufacturing overheadVariable cost of goods soldVariable sellingand administrative expensesFixed selling and administrativeexpensesSalesNet operating income (loss)Contribution margin | ||
| (Click to select)Gross marginContribution margin | ||
| Fixed expenses: | ||
| (Click to select)Fixedselling and administrative expensesNet operating income(loss)Contribution marginVariable selling and administrativeexpensesSalesFixed manufacturing overheadVariable cost of goodssold | ||
| (Click to select)Netoperating income (loss)Variable selling and administrativeexpensesContribution marginVariable cost of goods soldFixedmanufacturing overheadSalesFixed selling and administrativeexpenses | ||
| (Click to select)Net operating lossNet operatingincome | $ | |
