FINANCIAL MANAGEMENT

PLEASE SOLVE ALL AND GIVE SOLUTION AND EXPLANATION IF NECESSARY

Problem 2 The Income Statement for the Woodstock Company for the past year is: Sales (150,000 units @30) 4,500,000 Cost of goods sold: Materials 1,050,000 Labor 1,500,000 Variable factory overhead 450,000 Fixed factory overhead 500,000 3,500,000 Gross Profit 1,000,000 Variable marketing expenses 135,000 Fixed marketing expenses 185,000 Fixed manufacturing expenses 180,000 500,000 Income before income tax 500,000 Income tax 250,000 Net income 250,000 Woodstock is preparing its budget for the coming year and has made the following projections about cost increases: materials, 5%; labor, 8%; and all other costs (including fixed), 6%. Production capacity is 200,000 units. The President has been offered various proposals by the division manager as follows: 1. Maintain the present volume and sales price. 2. Produce and sell at capacity and reduce the unit price to P28. 3. Raise the unit price to P32, spend an extra P300,000 on advertising, and produce and sell 180,000 units. Required. Recommended action based on the quantification of alternatives. (10 points each alternative