Presented is the 2017 contribution income statement of Grafton Products. GRAFTON PRODUCTS...
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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
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