Contribution Income Statement The ABC Lighting Company 3 The ABC Lighting Company makes and sells lamps The company has a factory in Wisconsin and a home office in Chicago The following information pertains to ABC for the month of June Number of lamps sold 300,000 lamps Selling Price $10 per lamp Costs Materials $900,000 Boxes for lamps 120,000 Salaries for factory management 40,000 Salaries for home office employees 90,000 Factory cafeteria 22,000 TV Advertising 31,000 Sales Commissions $1 00 per lamp Heat for the factory 10,000 Rent on the Chicago office building 30,000 Wages for lamp assembly line workers 300,000 Required A Prepare a Contribution Income Statement for the month of June in good form B All scenarios are referenced to the above original data Show calculations in a comparative contribution income statement The Vice President of Manufacturing believes that by using higher quality manufacturing materials, which will add $2 per unit more to the manufacturing cost, the company could sell 10 more lamps Would this be a good decision The Vice President of Marketing believes that if ABC Lighting bought $300,000 of TV advertising on the Tonight Show, the company could sell 15 more lamps Would this be a good decision The Vice President of Sales believes that if the selling price is lowered by $3, the company would sell 10 more lamps Would this be a good decision The CEO believes that if the selling price were increased by 10 , the company would make more money even if it resulted in a 10 decline in lamps sold Is the CEO correct The CEO believes that if the commission to the sales force is increased by $ 50 to $1 50 per lamp, the selling price is lowered by $1, and the TV advertising is increased by $300,000, the company can increase its lamp unit sales by 10 Would this be a good decision

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Posted on Jul 09, 2024

Contribution Income Statement - The ABC Lighting Company #3

The ABC Lighting Company makes and sells lamps. The company has a factory in Wisconsin and a home office in Chicago.

The following information pertains to ABC for the month of June:

Number of lamps sold 300,000 lamps

Selling Price $10 per lamp

Costs:

Materials $900,000

Boxes for lamps 120,000

Salaries for factory management 40,000

Salaries for home office employees 90,000

Factory cafeteria 22,000

TV Advertising 31,000

Sales Commissions $1.00 per lamp

Heat for the factory 10,000

Rent on the Chicago office building 30,000

Wages for lamp assembly line workers 300,000

Required:

A. Prepare a Contribution Income Statement for the month of June in good form.

B. All scenarios are referenced to the above original data. Show calculations in a comparative contribution income statement.

The Vice President of Manufacturing believes that by using higher quality manufacturing materials, which will add $2 per unit more to the manufacturing cost, the company could sell 10% more lamps. Would this be a good decision?
The Vice President of Marketing believes that if ABC Lighting bought $300,000 of TV advertising on the Tonight Show, the company could sell 15% more lamps. Would this be a good decision?
The Vice President of Sales believes that if the selling price is lowered by $3, the company would sell 10% more lamps. Would this be a good decision?
The CEO believes that if the selling price were increased by 10%, the company would make more money even if it resulted in a 10% decline in lamps sold. Is the CEO correct?
The CEO believes that if the commission to the sales force is increased by $.50 to $1.50 per lamp, the selling price is lowered by $1, and the TV advertising is increased by $300,000, the company can increase its lamp unit sales by 10%. Would this be a good decision?