ABC Inc. manufactures and sell product A. The sale price and costs on a per...
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Accounting
ABC Inc. manufactures and sell product A. The sale price and costs on a per unit basis, when 20,000 units per month are sold, are as follows:
Manufacturing costs:
Direct materials used $2.00
Direct labour $1.00
MOH variable $1.20
MOH fixed $1.10
Selling expenses
Variable $4.00
Fixed $1.10
Sale price per unit $15
REQUIRED: Each question is independent.
a. Present the income statement to calculate the annual operating income of ABC Inc.
b. ABC Inc.s top management would like to improve profitability. The following strategy is implemented: decrease sale price by 10% to increase sales volume by 30%. The advertising budget should increase by $20,000.
b1. Calculate the impact of this strategy on ABC Inc.s annual contribution margin. b2. Calculate the impact on ABC Inc.s annual operating income.
Please provide steps to solve the question.Thank you!
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