Question

Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 6.70 p per unit. Fixed costs are expected to amount to 56,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.30 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 9 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina's national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina's peso was worth $0.104 U.S. dollar.) Required: 1. Suppose management alters its current plans by spending an additional amount of 3,000 pon advertising and increases the selling price to 7.70 p per unit. Calculate the profit on 65,000 units. (Do not round intermediate calculations. Enter your answer in pesos.) Profit

Answer 1

Sol. Corrientes Company Income Statement under Variable Costing Particulars Amount - Sales 65,000 unit x 7.TOP 500,5001 less: Variable Cost's :- - Variable Manufacturing & Administrative Cest! (149,500) a Sales Commission (45045) - Contribution Margin 305,955 p lesso fixed Expenses : 2 fixed Cobra (56,000) Additionaal Advertising Expense. Net Profit 246,955 p. (3000), Net profit = 246,955P Working lote: Variable Manufacturing & Administrative Cota = 65000vnit X 2.30p = 149,500 p - Sales Commission as = Sales & 9% = 500,500px.9% = 45,045 P Commission...