Problem 18-4B Break-even analysis, different cost structures, and income calculations c241 P2 Stam Co. produces and sells two products, BB and TT. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Income statements for each product follow. Sales Variable costs Contribution margin Fixed costs Income Product BB Product IT $800,000 $800,000 560,000 100,000 240,000 700,000 100,000 560,000 $140,000 $140,000 Page 736 Required 1. Compute the break-even point in dollar sales for each product. 2. Assume that the company expects sales of each product to decline to 33,000 units next year with no change in the unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). Check (2) Income: BB, $58,400; TT, $(98,000) 3. Assume that the company expects sales of each product to increase to 64,000 units next year with no change in the unit selling prices. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). Problem 18-5B Contribution margin; income effects of alternative strategies Oc2 QAP2 Connor Company sold 30,000 units of its only product for $28 per unit this year. Manufacturing and selling the product required $225,000 of fixed costs. Its per unit variable costs follow. $10 6 Direct materials Direct labor Variable overhead costs Variable selling and administrative costs 2 1 For the next year, management will use a new material, which will reduce direct materials costs to $8 per unit and reduce direct labor costs to $5 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $30 per unit, which would decrease unit sales volume to 25,000 units. Required 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. 2. Prepare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new material and (b) using the new material and increasing the selling price. Analysis Component 3. Using answers to part 2, should management raise the selling price