Child's Play Company Child's Play Company makes a plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. Based on sales from January through September 2018, the company expects that 2018 sales will amount to 300,000 units. In late 2018, Diana Carlos, the president of the company, was considering an alternative marketing plan for 2019 that was presented to her by Bill Jackson, the marketing manager. Bill's alternative marketing plan is presented below: 2019 Marketing Plan: "At the present time, we sell the product to retailers for $8.00 per rattle. Retailers generally charge their customers between $9 and $9.50. If we cut our selling price to retailers to $7.50, 1 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 $6,000 in Advertising and Promotion costs. Based on the price cut and the increase in advertising and promotion, expect that we will be able to boost our sales volume by 25 percent to 375,000 units in 2019." Diana received cost data from the company's CFO, Don Beetle. Don expects that the 2018 cost data below are also reliable estimates for 2019 for a production volume up to 500,000 units. 2018 Cost Data Manufacturing Costs for rattles (based on production volume of 300,000 units): Direct Materials $0.80 per unit Direct Labor $0.50 per unit Packaging $0.70 per unit Variable Manufacturing Overhead $1.20 per unit Fixed Manufacturing Overhead $540,000 Selling and Administrative Costs for rattles (based on sales volume of 300,000 units): Sales Commissions $0.80 per unit Shipping Costs $0.50 per unit Advertising and Promotion (fixed) $180,000 Selling and Admin Expenses (fixed) $250,000 (1) CVP Income Statement for 2018: Total Per unit Revenue 2400000 Less: Variable Cost 1350000 4.5 Contribution Margin 1050000 3.5 Less: Fixed Cost 970000 Net Income 80000 Notes: Revenue(300000 units * 8 per unit) = $2400000 Variable Cost =(0.8+0.5+0.7+1.2+0.8+0.5= 4.5 per unit) = (300000 units * 4.5 per unit =$1350000) (2) Contribution Margin Ratio : = Contribution /Sales =1050000/2400000 =0.4375 =43.75% (3) BEP in Units =(Fixed cost/Contribution per unit) =[(Fixed cost)/(Selling price - Variable cost)] =[(970000/(8-4.5)] = (970000/3.5) =277143 units (4) BEP in Dollars =BEP in Units X Selling price per unit =277143 units =$2,217,144 Or =Fixed cost /CM ratio =970000/0.4375 =$2217144 5. Assuming the selling price and cost changes in the Marketing Plan are adopted, prepare a CVP Income Statement for 2019, assuming sales and production increase by 25% as outlined in the Marketing Plan. Child's Play Company CVP Income Statement For the Year Ended December 31, 2019 Total Per Unit 6. What is the change in Net Income from 2018 to 2019 if they adopt the marketing plan? 7. Using the above CVP Income Statement, determine the Company's Contribution Margin Ratio for 2019. Round to zero decimal places. 8. Assuming the selling price and cost changes in the Marketing Plan are adopted, determine the break-even point in number of rattles for the company in 2019. For full credit, please show the elements of your computations. Round to the nearest next whole unit. 9. Assuming the selling price and cost changes in the Marketing Plan are adopted, determine the break-even point in sales dollars of rattles for the company in 2019. For full credit, please show the elements of your computations. Round to the next dollar