Production cost and price data for 2020 for Beltar Company are as follows: Maximum capacity per year - 200,000 units, Variable manufacturing costs - $12/unit, Fixed factory overhead costs - $600,000/year, Variable selling and administrative costs - $5/unit, Fixed selling and administrative costs - $300,000/year, Current sales price - $23/unit

The companys sales for 2020 totalled 185,000 units. However, a strike at a major supplier has caused a shortage of raw materials, and as a result, 2021 sales will reach only 160,000 units. Top management is planning to reduce fixed costs in 2021 by $59,000. Management is also thinking of either increasing the selling price or reducing the variable costs, or both, in order to earn 2021 target operating income that will be the same dollar amount as in 2020. The company has already sold 30,000 units in 2021 at $23/unit with the variable costs remaining unchanged from 2020.

1 -Calculate the contribution margin per unit required on the remaining 130,000 units in order to reach the target operating income in 2021

a. Calculate the target operating income, b. Given the new fixed cost structure, the target operating income, and the units sold so far, calculate the remaining total contribution margin needed to achieve the target operating income calculated in (a)., c. Calculate the contribution margin per unit required on the remaining 130,000 units

2 - Numerical analysis to assist with decision on new cost structures

Proposed New Cost Structure Assumption 1 - no change in sales volume Current Cost Structure Sales Variable costs Contribution margin Fixed costs Operating income Proposed New Cost Structure Assumption 2 - if sales increase by 19% Current Cost Structure Sales Variable costs Contribution margin Fixed costs Operating income Proposed New Cost Structure Assumption 3 - if sales decrease by 19% Current Cost Structure Sales Variable costs Contribution margin Fixed costs Operating income Required PART 3 Your thoughts regarding potential benefits and risks of new cost structure