Product Pricing: Single Product

Presented is the 2009 contribution income statement of Colgate Products.

COLGATE PRODUCTS

Contribution Income Statement

For Year Ended December 31, 2009Sales (18,000 units)$2,160,000Less variable costsCost of goods sold$720,000Selling and administrative198,000(918,000)Contribution margin1,242,000Less fixed costsManufacturing overhead770,000Selling and administrative340,000(1,110,000)Net income$132,000

During the coming year, Colgate expects an increase in variable manufacturing costs of $6 per unit and in fixed manufacturing costs of $72,000.

(a) If sales for 2010 remain at 18,000 units, what price should Colgate charge to obtain the same profit as last year?

(b) Management believes that sales can be increased to 24,000 units if the selling price is lowered to $105.What would be the excepted profit (or loss) as a result of this action? Use a negative sign with your answer, if appropriate.

(c) After considering the expected increases in costs, what sales volume is needed to earn a profit of $132,000 with a unit selling price of $105?

_______units