CVP analysis with changing costs and prices Tim and Can Ltd., a manufacturing com- pany has been in operation for three years. At the end of 1992 the company reported the following annual sales and expenses:

Management had targeted a $150,000 net income for the year. For 1993 the company expects variable manufacturing costs to increase by 12 percent and variable selling and administrative costs to increase by 4 percent. Fixed manufacturing costs are expected to increase by $9,000, and fixed selling and administrative costs are expected to increase by $30,000. Tim & Can management believes the company's product may be underpriced and that a 20 percent price increase would have little effect on the number of units sold.

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Sales $800,000 Variable manufacturing. $360,000 Fixed manufacturing. 300,000 Variable selling and administrative 120,000 Fixed selling and administrative. 120,000 900,000 Net income (loss) ($100,000)