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 (14,400 units x $75) $1,080,000 Less variable costs Direct materials (14,400 units x $10) $144,000 Direct labor (14,400 units x $10) 144,000 Variable factory overhead (14,400 units x $4) 57,600 Selling and administrative Contribution margin (14,400 units x $2) (14,400 units x $49) 28,800 (374,400) 705,600 Less fixed costs Factory overhead Selling and administrative 432,000 288,000 (720,000) a. Purchasing automated assembly equipment, which should reduce direct labor costs by $4 per unit and increase variable overhead costs by $1 per unit and fixed factory overhead by $14,400 per month. Increase of $ 14,400 b. Reducing the selling price by $5 per unit. This should increase the monthly sales by 3,600 units. At this higher volume, additional equipment and salaried personnel would be required. This will increase fixed factory overhead by $4,800 per month and fixed selling and administrative costs by $2,160 per month. Increase of $ 785,040 c. Buying rather than manufacturing a component of Anderson's final product. This will increase direct materials costs by $5 per unit. However, direct labor will decline $3 per unit, variable factory overhead will decline $1 per unit, and fixed factory overhead will decline $30,000 per month. Increase of $ 721,200 d. Increasing the unit selling price by $5 per unit. This action should result in a 2,400 unit decrease in monthly sales. Decrease of $ 648.000 d. Increasing the unit selling price by $5 per unit. This action should result in a 2,400 unit decrease in monthly sales. Decrease of = $ 648,000 e. Combining alternatives (a) and (d). Decrease of $669,600