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Sales (40,000 units at $12) $480,000 Less cost of goods sold: Direct materials $120,000 Direct labor 65, 600 Manufacturing overhead 90,000 275, 600 Gross margin

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Sales (40,000 units at $12) $480,000 Less cost of goods sold: Direct materials $120,000 Direct labor 65, 600 Manufacturing overhead 90,000 275, 600 Gross margin 204, 400 Less operating expenses: Selling expenses: Variable: Sales commissions 558.400 Shipping 14,000 52, 400 Fixed (advertising, salaries) 110,000 Administrative expenses: Variable (billing, other) 5, 200 Fixed (salaries, other) 85,000 250, 600 Net loss $(46.200) All variable expenses in the company vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable manufacturing overhead is 50 cents per unit. The company's plant has a capacity of 70,000 units. Management is particularly disappointed with 2012's operating results. Several possible courses of action are being studied to determine what should be done to make 2013 profitable. Redo Alpine, Incs 2012 income statement in the contribution format. Show both a total column and a per unit column on your statement. Leave enough space to the right of your numbers to enter the solution to both parts of (2) below. In an effort to make 2013 profitable, the president is considering two proposals prepared by members of her staff: The sales manager would like to reduce the unit selling price by 25 percent. He is certain that this would fill the plant to capacity. The executive vice president would like to increase the unit selling price by 25 percent, increase the sales commissions to 12 percent of sales, and increase advertising by $90,000. Based on experience in another company, he is confident this would trigger a 50 percent increase in unit sales. Prepare two contribution income statements, one showing what profits would be under the sales managers proposal and one showing what profits would be under the vice presidents proposal. On each statement, include both total and per unit columns (do not show per unit data for the fixed costs). Refer to the original data. The president thinks it would be unwise to change the selling price. Instead, she wants to use less costly materials in manufacturing units of product, thereby reducing costs by $1.73 per unit. How many units would have to be sold during 2013 to earn a target profit of $59,000 for the year? Refer to the original data. Alpine, Inc.s advertising agency thinks that the problem lies in inadequate promotion. By how much can advertising be increased and still allow the company to earn a target return of 4.5 percent on sales of 60,000 units

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