Influenced and fixed and variable costs on Price and profit. In 19A the velasquez products company produced a machine that sold for $600$of which 450 represented cost of goods sold and $50 represented marketing and administrative expanses. The cost of goods sold was compromised of 40% material cost, 40% of labor cost and 20% of factory overhead. During 19A, 2000 machines were sold. During 19B, increases 20% in cost of materials and 25% in cost of labor are anticipated . The compny plans to rise the selling price to $675 per unit with resulting decrease of 40% in the number of units to be sold.

Required:

1) An income statement for 19B, indicating the new costs per unit. Assume that materials and labor cost will still equal 80% of the cost of good sold for 19B and marketing and administrative expenses are still $50 per unit.

2) A revised income statement for 19B, disregarding the 80% relationship of material and labor costs to cost to good sold. After the statement required in part (1) was prepared, it was ascertained that the 20% factory overhead in 19A consisted of $100,000 fixed and $80,000 variable expenses. The decrease in number of units to be sold in 19B does not influence the fixed cost.

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