2 Glass company manufactures glasses that it sells to mail-order distributors. 3 4 Sales price per pair of glasses: 5 Manufacturing and other costs follow: 6 Variable Cost per unit 7 Direct Materials 8 Direct labor 9 Factory overhead 10 Distribution 11 Total Variable costs 12 13 Fixed costs per month 14 Factory overhead 15 Selling and Administrative 16 Total Fixed costs 17 18 Current monthly production and sales volume $60 $13 12 2 3 $30 $20,000 10,000 $30,000 6,000 units 19 20 Monthly capacity 7000 units 21 Additional information: The variable distribution costs are for transportation to mail-order distributors. 22 23 Required: Determine the change in income of each of the following 3 independent situations on monthly profits. 24 Make sure you show your computations to provide the monthly change in income and give a recommendation to management if they should accept the change. 25 #1 A $2 increase in the unit selling price should result in a 1,000 unit decrease in monthly sales 26 #2 A 12% decrease in the unit selling price should result in a 2,000 unit increase in monthly sales. 27 However, because of capacity constraints, the last 1,000 units would be produced during overtime with the 28 direct labor costs increasing by 50%. 29 #3 a British distributor has proposed to place a special one-time order for 1,000 units at a reduced selling 30 price of $55 per unit. The distributor would pay all transportation costs, so there are no variable distribution costs. 31 There would be additional fixed selling and administrative costs of $2,000. 32