S. Corp. produces products to support the computer industry. The company produces four separate products, each with a different selling price and directly traced variable costs, as follows:

Products	Price	Var Costs
Apple	$78.00	39.00
Banana	63.00	35.00
Candy	49.00	31.00
Drink	37.00	21.00

Jim Thomas, S. Corps President, has developed the sales forecast for the upcoming year, in conjunction with his sales & marketing team. The result of their forecast development yielded the following projections:

Products	Proj Sales units
Apple	34,000
Banana	68,000
Candy	51,000
Drink	102,000

After reviewing, in detail, the cost structure of the products, the Controller, Cathy Jones, wanted to assess the financial projections in relation to the companys fixed cost burden, which was projected to be $4,073,200. She has asked you to perform the following analysis steps:

1. Determine the projected sales, variable costs, contribution margin (dollar and percent), and operating income for the next fiscal year;
2. Assuming the projected sales mix, what is the breakeven in total units for the next fiscal year. (must use bundle process)

After you perform these analyses and present them to Jones, she takes them to the President to review. Jones knows that he is concerned about whether the projected results would indicate a strong, profitable year or not. Upon reviewing these results and your analysis, Mr. Thomas asks the Operations Manager, Jack Lamon, and Jones to see if there are ways to reduce costs and improve the profitability of the company, given the low projected profitability.

After reviewing, in detail, the cost structure of the operations, Lamon and Jones meet to discuss options. Lamon suggests that the company can reduce the variable costs for the four products by reducing the costs for safe disposal of waste that is a by-product of the production process for the products. After some discussion, during which Lamon suggested that the competitors were already doing what he was proposing, Lamon stated that the company needed this cost break right now to save jobs. Besides, he said, we arent breaking any laws. We are just using the regulations to our advantage. This reduction, he estimates, will reduce the unit variable costs as follows:

Products	Unit Cost reduction
Apple	3
Banana	2
Candy	2
Drink	3

With the proposed reduction in unit costs due to the disposal costs, Lamon also noted that there would be an increase in the projected fixed costs for the company in the projected amount of $557,300.

After their meeting, Jones is concerned that the action to change the disposal methods might expose the company to potential environmental costs and/or fines in the future. Jones asks you to update your analysis to determine the projected impact on the company's profitability before she brings her concerns to the President.

Required:

1. After determining the results as requested, prepare a mini income statement which shows the projected profit of the company, given the initial assumptions, including the data requested above.
2. After factoring in the new variable costs for the products, determine the new breakeven point for the company, given the same product mix assumption.
3. Using the new variable costs for the products, determine the projected sales, variable costs, and operating income for the next fiscal year.
4. After adjusting the variable costs, prepare a comparative mini income statement that illustrates the difference in the two projections and comment on the findings.
5. What would you do if you were the Controller? Include in your response an appropriate application of the specific Standards of Ethical Conduct for Management Accountants as presented in chapter one.
6. Final points will be earned based on the overall presentation of the data and the explanations in support of the data.