Child$$s Play Company makes a plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. In late $2024,$ Diana Suarez, the president of the company, was considering an alternative marketing plan for $2025$ that was presented to her by Bill Duffy, the marketing manager. Based on sales from January through October $2024,$ Diana expected that $2025$ sales would amount to $100,000$ units. Bill$$s alternative marketing plan is presented below:

$2025$ Marketing Plan: $$At the present time, we sell the product to retailers for $$11\mathrm{.}00$ per rattle. Retailers generally charge the consumers between $$12$ and $$12\mathrm{.}50.$ If we cut our selling price to retailers to $$10\mathrm{.}00,$ I expect that the product will do much better. The retailers' increased markup will give them the incentive to display our product more prominently and to promote it more vigorously to customers. We should support this strategy by supplying more promotional materials to retailers, which I expect would be an increase of $$1,200$ in Advertising and Promotion costs. Based on the price cut and the increase in advertising and promotion, I expect that we will be able to boost our sales volume by $20$ percent to $120,000$ units in $2025.$

Diana received cost data from the company$$s CFO, Don Capp. Don expects that the cost data below are also reliable estimates for $2025$ for a production volume up to $150,000$ units. Beyond $150,000$ units, the company would have to rent additional machines $($with a capacity of $50,000$ units each$),$ which would increase fixed manufacturing overhead costs by $$20,000$ per machine.

Sales Price $($Current$)$ $$11\mathrm{.}00$ per rattle Units Sold $($Current$)100,000$

Sales Price $($Proposed$)$ $$10\mathrm{.}00$ per rattle Units Sold $($Proposed$)120,000$

$2024$ Cost Data and Estimated $2025$ Cost Data

Manufacturing Costs for rattles $($based on production volume of $100,000$ units$)$:

Per Unit Costs Total Costs Expected Increase

Direct Materials $$0\mathrm{.}90$

Direct Labor $$1\mathrm{.}20$

Variable Manufacturing Overhead $$0\mathrm{.}80$

Packaging $$0\mathrm{.}25$

Fixed Manufacturing Overhead $$180,000$ $$20,000$ per machine $($above $150,000$ units produced$)$

Selling and Administrative Costs for rattles $($based on sales volume of $100,000$ units$)$:

Per Unit Costs Total Costs Expected Increase

Sales Commissions $$0\mathrm{.}75$

Shipping Costs $$0\mathrm{.}50$

Advertising and Promotion $($fixed$)$ $$60,000$ $$1,200$ total

Using the information on the "Case Study" tab, answer the following questions. Include all costs $($manufacturing costs and selling and administrative costs$)$ in your calculations.

$1.$ Prepare a CVP Income Statement for $2024$ using the current production and sales volume $(100,000$ rattles$)$ and the current cost data, assuming no changes to selling price or costs.

Child's Play Company

CVP Income Statement

For the Year Ended December $31,2024$

Total Per Unit

Sales Revenue

Less: Variable Cost

Contribution margin

Less: Fixed Cost

Net Income

$2.$ Determine the number of rattles the company would need to sell in $2024$ in order to break$-$even, assuming no changes to selling price or costs. Please show your work and round to the nearest next whole unit.

$3.$ Assuming the selling price and cost changes in the Marketing Plan are adopted, prepare a CVP Income Statement for $2025,$ assuming sales and production increase by $20\%$ as outlined in the Marketing Plan.

Child's Play Company

CVP Income Statement

For the Year Ended December $31,2025$

Total Per Unit

$4.$ Assuming the selling price and cost changes in the Marketing Plan are adopted, determine the number of rattles the company would need to sell in $2025$ in order to break$-$even. Please show your work and round to the nearest next whole unit.

$5.$ Assuming the selling price and cost changes in the Marketing Plan are adopted, determine the number of rattles the company would need to sell in $2025$ in order to earn $$400,000$ in profit. Please show your work and round to the nearest next whole unit.Fixed Selling and Admin Expenses $$75,000$