Product Pricing: Single Product Presented is the 2014 contribution income statement of Colgate Products. ...
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Product Pricing: Single Product Presented is the 2014 contribution income statement of Colgate Products.
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
Next year, Colgate expects an increase in variable manufacturing costs of $8 per unit and in fixed manufacturing costs of $35,000. (a) If sales for 2015 remain at 13,000 units, what price should Colgate 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 $107. 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 pretax profit of $167,000 with a unit selling price of $107? Round to the nearest unit. Answer
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