Multiple Changes in Profit Plans In an attempt to improve profit performance, Anderson Company's management is considering a number of alternative actions. An October contribution income statement for Anderson Company follows. ANDERSON COMPANY Contribution Income Statement For Month of October Sales Less variable costs Direct materials Direct labor Variable factory overhead Selling and administrative Contribution margin Less fixed costs Factory overhead Selling and administrative Net income (loss) (24,000 units x $75) (24,000 units x $10) $240,000 (24,000 units x $10) 240,000 (24,000 units x $4) 96,000 (24,000 units x $2) 48,000 (24,000 units x $49) $1,800,000 (624,000) 1,176,000 720,000 480,000 (1,200,000) $(24,000)

In an attempt to improve profit performance, Anderson Compuny's munagement sconsidering a number af atternative acticns. An october contritivion income statement for Anderson Company folows a. Purchasing automated assembly equipment, Which should reduce direct labor costs by $4 per unit and increase variable overhead costs by st per unit and fixed factery overthead b $24,000 per month. s b. Reducing the selling price ty $5 per unit. This should increase the monthly sales by 6,000 units. At this higher volume, additianal equipment and salaned personnel wocild be required. This will increase foxed factory overhead by $3,000 per month and fixed selling and administrative costs by $3,600 per month C. Buying rather than manufacturing a component of Anderson's final product. This will increuse direct materials costs by 15 per unit thowever, direct laboe will decline $3 per unic: variable factory overhead will decline 51 per urit and foed factory overhead wil decline 550,000 per month. 5 x d. increasing the unit selling price by 55 per unit. This action should result in a 4,000 und decreane in monthly sales e. Combining alternatives () and (d)