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Product Pricing: Single Product Presented is the 2009 contribution income statement of Colgate Products. COLGATE PRODUCTS Contribution Income Statement For Year Ended December 31, 2009

Product Pricing: Single Product Presented is the 2009 contribution income statement of Colgate Products.

COLGATE PRODUCTS Contribution Income Statement For Year Ended December 31, 2009
Sales (18,000 units) $2,160,000
Less variable costs
Cost of goods sold $720,000
Selling and administrative 198,000 (918,000)
Contribution margin 1,242,000
Less fixed costs
Manufacturing overhead 750,000
Selling and administrative 320,000 (1,070,000)
Net income $172,000

During the coming year, Colgate expects an increase in variable manufacturing costs of $8 per unit and in fixed manufacturing costs of $108,000. (a) If sales for 2010 remain at 18,000 units, what price should Colgate charge to obtain the same profit as last year? $Answer (b) Management believes that sales can be increased to 24,000 units if the selling price is lowered to $109. What would be the excepted profit (or loss) as a result of this action? Use a negative sign with your answer, if appropriate. Answer (c) After considering the expected increases in costs, what sales volume is needed to earn a profit of $172,000 with a unit selling price of $109? Answer units

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