Product Pricing: Single Product

Presented is the Year $1$ contribution income statement of Colgate Products. COLGATE PRODUCTS

Contribution Income Statement

For Year Ended December $31,$ Year $1$

Sales $(12,000$ units$)$ $$1,440,000$

Less variable costs

Cost of goods sold $$480,000$

Selling and administrative $132,000(612,000)$

Contribution margin $828,000$

Less fixed costs

Manufacturing overhead $530,000$

Selling and administrative $200,000(730,000)$

Net income $$98,000$

Next year, Colgate expects an increase in variable manufacturing costs of $$6$ per unit and in fixed manufacturing costs of $$48,000.$

$($b$)$ Management believes that sales can be increased to $16,000$ 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 pretax profit of $$98,000$ with a unit selling price of $$105?$