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Presented is the current year contribution income statement of Grafton Products. Next year, Grafton...

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Accounting

Presented is the current year contribution income statement of Grafton Products.

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Next year, Grafton expects an increase in variable manufacturing costs of $10 per unit and in fixed manufacturing costs of $30,000.

  1. If sales for next year remain at 15,000 units, what price should Grafton charge to obtain the same profit as last year?

  2. Management believes that sales can be increased to 18,000 units if the selling price is lowered to $165. Is this action desirable? (Use the cost data from part a.)

  3. After considering the expected increases in costs, what sales volume is needed to earn a pretax profit of $200,000 with a unit selling price of $165?

GRAFTON PRODUCTS Contribution Income Statement For Year Ended December 3 $2,625,000 $1,275,000 150,000 Sales (15,000 units) Less variable costs Cost of goods sold Selling and administrative.. Contribution margin Less fixed costs Manufacturing overhead.. Selling and administrative. Net income (1,425,000) 1,200,000 685,000 330,000 (1,015,000) $ 185,000

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