Product Pricing: Single Product Presented is the 2014 contribution income statement of Colgate Products. COLGATE PRODUCTS Contribution Income Statement For...

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Product Pricing: Single Product
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 fixed manufacturing costsof $35,000.

(a) If sales for 2015 remain at 13,000 units, what price shouldColgate charge to obtain the same profit as last year? Round to thenearest cent.
$Answer

(b) Management believes that sales can be increased to 16,000 unitsif the selling price is lowered to $107. What would be the exceptedprofit (or loss) as a result of this action? Use a negative signwith your answer, if appropriate.
Answer

(c) After considering the expected increases in costs, what salesvolume is needed to earn a profit of $167,000 with a unit sellingprice of $107? Round to the nearest uni

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

Answer & Explanation Solved by verified expert

4.2 Ratings (494 Votes)

Variable manufacturing cost per unit in 2014 52000013000 40 Variable selling and administrative cost per unit in 2014 14300013000 11 During 2015 Colgate expects an increase in variable manufacturing costs of 8 per unit and in fixed manufacturing costs See Answer

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