Question

ALPINE, INC. Income Statement For the year ended June 30, 2019 Sales (40,000 Units at $12) $480,000 Less: Cost of Goods Sold Direct Materials Direct Labor Manufacturing Overhead $120,000 / 40000 = 3.0 65,600 40000 = 1.64 90.000 275,600 Gross Margin 204,400 Less: Operating expenses: Selling expenses: Variable: Sales Commissions Shipping -.96 $38,400/48000 = .08-> 8% 14,000 52,400 30400 40000 unit Fixed (Advertising, salaries) 110,000 Administrative expenses: Variable (billing, other) Fixed (salaries, other) 3,200 85,000 250,600 Net Loss $(46,200)

Answer 1

Answer with working notes is given below

per unit $12.00 $3.00 $1.64 $0.50 $0.96 ALPINE, INC. Contribution Format Income Statement For the year ended June 30,2019 Total Sales $480,000 Less: Variable cost Direct Material $120,000 Direct Labor $65,600 Variable manufacturing overhead $20,000 Sales commission - 8% of Sales Dollars $38,400 Shipping expense $14,000 Administrative expenses $3,200 Total Variable cost $261,200 Contribution Margin $218,800 LESS: Fixed Cost Manufacturing overhead ($90,000-$20,000) $70,000 Selling expense $110,000 Administrative $85,000 Total Fixed Cost $265,000 Net Loss -$46,200 $0.35 $0.08 $6.53 $5.47 70,000 Total $672,000 per unit $9.60 Selling price 20% less $3.00 a) Sales units- Plant capacity Selling price Less: Variable cost Direct Material Direct Labor Variable manufacturing overhead Sales commission - 8% of Sales Dollars Shipping expense Administrative expenses Total Variable cost Contribution Margin LESs: Fixed Cost Manufacturing overhead Selling expense Administrative Total Fixed Cost Net Loss $210,000 $114,800 $35,000 $53,760 $24,500 $5,600 $0.35 $0.08 $6.34 $3.26 $443,660 $228,340 $70,000 $110,000 $85,000 $265,000 -$36,660 b) 60,000 Total $864,000 per unit $14.40 Increase selling price by 20% $3.00 $1.64 $180,000 $98,400 $30,000 $103,680 $21,000 $4,800 $0.50 Sales units - 50% increase Selling price Less: Variable cost Direct Material Direct Labor Variable manufacturing overhead Sales commission -12% of sales Shipping expense Administrative expenses Total Variable cost Contribution Margin LESS: Fixed Cost Manufacturing overhead Selling expense Administrative Increase in Advertising cost Total Fixed Cost Net profit $1.73 $0.35 $0.08 $7.30 $7.10 $437,880 $426,120 $70,000 $110,000 $85,000 $85,000 $350,000 $76,120 Target profit Fixed Cost Total target $59,000 $265,000 $324,000 Units to sell in 2020 Total target Revised contribution per unit Units to sell $324,000 46,957 $6.90 Existing variable cost Less: Reduction in material cost Revised variable cost $5.10 $12.00 Selling price Less: Revise variable cost Revised contribution per unit $6.90 Sales units selling price Total Sales 60,000 $12.00 $720,000 Contribution per unit Total Contribution Less: Fixed Cost Return on Sales Advertising spend $5.47 $328,200 (60,000 X $5.47) $265,000 $36,000 (5% of $720,000) $27,200 Existing Cost per unit Cost for Special order Total Relevant Cost 15,000 units $1.64 $0.500 $0.96 $3.00 $1.64 $0.50 $0.35 $0.08 $0.63 $0.04 Direct Material Direct Labor Variable manufacturing overhead Sales commission Shipping expense Administrative expenses Foreign Import duty Total Cost Add: profit Existing loss Total Target Total Units Unit price to be quoted $45,000 $24,600 $7,500 No sales commission $9,450 80% increase $600 50% reduction $3,500 $90,650 $18,000 $46,200 $154,850 15,000 $10.32 For Special order evaluation only relevant cost will be considered.