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This year Cairo Company sold 33,000 units of its only product for $18.40 per unit. Manufacturing and selling the product required $118,000 of fixed manufacturing costs and $178,000 of fixed selling and administrative costs. Its per unit variable costs follow Material Direct labor (paid on the basis of completed units) Variable overhead costs Variable selling and administrative costs $3.80 2.80 0.38 0.18 Next year the company will use new material, which will reduce material costs by 60% and direct labor costs by 40% and will not affect product quality or marketability. Management is considering an increase in the unit sales price to reduce the number of units sold because the factory's output is nearing its annual output capacity of 38,000 units. Two plans are being considered. Under plan 1, the company will keep the price at the current level and sell the same volume as last year. This plan will increase income because of the reduced costs from using the new material. Under plan 2, the company will increase price by 25%. This plan will decrease unit sales volume by 10%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same Required 1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.) Plan 1 $372023 Plan 2 $353855 References Worksheet Learning Objective: 22-A1 Compute the contribution margin and describe what it reveals about a company's cost structure Difficulty: 3 Hard Learning Objective: 22-P2 Compute the break-even point for a single product company Ask your instructor a question Check my work 2. Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2. The statements should report sales, total variable costs, contribution margin, total fixed costs, income before taxes, profit taxes (30% rate), and net profit. (Input all amounts as positive values. Round you calculations to 2 decimal places and final answers to the nearest whole dollar amount. Omit the "$" sign in your response.) r contribution margin ratio to 2 decimal place, other intermediate CAIRO CO Forecasted Contribution Margin Income Statement Plan 1 $607200 Plan 2 Sales $683100 Variable costs 124080 111672 Contribution margin 483120 Fixed costs 296000 296000 Income before taxes 187120 Income taxes Net income 130984 $

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