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 2019, the company expects that 2019 sales will amount to 300,000 units.

In late 2019, 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, 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 $6,000 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 25 percent to 375,000 units in 2019."

Diana received cost data from the company's CFO, Don Beetle.Don expects that the 2019 cost data below are also reliable estimates for 2019 for a production volume up to 500,000 units.

2019 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

Question:

1.Assuming the selling price and cost changes in the Marketing Plan are adopted, preparing a CVP Income Statement for 2019, assuming sales and production increase by 25% as outlined in the Marketing Plan.

l_ 5. Assuming the selling price and cost changes in the Marketing Plan are adopted. prepare a CVP Income Statement for 2n1s, assuming sales and production increase by 25% as outlined in the Marketing Plan. Child's Play Company CUP Income Statement For the Year Ended December 31, 2019 Contribution Margin Net income