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Required information

$[$The following information applies to the questions displayed below.$]$

Burchard Company sold $40,000$ units of its only product for $$25$ per unit this year. Manufacturing and selling the product required $$525,000$ of fixed costs. Its per unit variable costs follow.

Direct materials

Direct labor

Variable overhead costs

Variable selling and administrative costs

W$.$

$\backslash$table$[[8\mathrm{.}00],[5\mathrm{.}00],[0\mathrm{.}50]]$

For the next year, management will use a new material, which will reduce direct materials costs to $$4\mathrm{.}50$ per unit and reduce direct labor costs to $$2$ 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 $36,000$ units.

$2.$ 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.

BURCHARD COMPANY

Contribution Margin Income Statement

$\backslash$table$[[$Contribution Margin Income Statement,$\backslash$table$[[$With new$],[$material and$],[$price increase$]]],[,$With new material$],[$Number of units:,$40,000,36,000],[,,$