Cost volume analysis. Please help with this:8
All variable expenses in the company vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable manufacturing overhead is 50 cents per unit. The company's plant has a capacity of 70,000 units. Management is particularly disappointed with 2012'_s operating results. Several possible courses of action are being studied to determine what should be done to make 2013 profitable. Redo Alpine, Inc.'s 2012 income statement in the contribution format. Show both a total column and a per unit column on your statement. Leave enough space to the right of your numbers to enter the solution to both parts of (2) below. In an effort to make 2013 profitable, the president is considering two proposals prepared by members of her staff: a. The sales manager would like to reduce the unit selling price by 25 percent. He is certain that this would fill the plant to capacity. b. The executive vice president would like to increase the unit selling price by 25 percent, increase the sales commissions to 12 percent of sales, and increase advertising by $90,000. Based on experience in another company, he is confident this would trigger a 50 percent increase in unit sales. Prepare two contribution income statements, one showing what profits would be under the sales manager's proposal and one showing what profits would be under the vice president's proposal. On each statement, include both total and per unit columns (do not show per unit data for the fixed costs). Refer to the original data. The president thinks it would be unwise to charge the selling price. Instead, she wants to use less costly materials in manufacturing units of product, thereby reducing costs by $1.73 per unit. How many units would have to be sold during 2013 to earn a target profit of $59,000 for the year? Refer to the original data. Alpine. Inc.'s advertising agency thinks that the problem lies in inadequate promotion. By how much can advertising be increased and still allow the company to earn a target return of 4.5 percent on sales of 60,000 units? Refer to the original data. The company has been approached by an overseas distributor who wants to purchase 15,000 units on a special price basis. There would be no sales commission on these units. However, shipping costs would be increased by 80 percent, and variable administrative costs would be reduced by 50 percent. Alpine, Inc., would have to pay a foreign import duty of behalf of the overseas distributor in order to get the goods into the country. Given these data, what unit price would have to be quoted on the 15,000 units by Alpine. Inc., to allow the company to earn a profit of $18,000 on total operations? Regular business would not be disturbed by this special order