The Clean-Em-Up Dishwasher Company #2

The Clean-Em-Up Dishwasher Company makes and sells dishwashers. The company has a factory in Michigan and a home office in Chicago.

The following information pertains to Clean-Em-Up Dishwashing for the month of May:

Number of dishwashers produced and sold 40,000

Selling Price $100 per dishwasher

Depreciation on the factory 50,000

Fuel for assembly line 120,000

Cost of wiring for dishwashers 320,000

Cost of metal for dishwashers 240,000

Salaries for factory management 190,000

Salaries for home office employees 100,000

Heat for the factory 40,000

Snow removal for factory 5,000

Rent for Eastern regional sales office 75,000

Radio advertising 170,000

Wages for assembly line workers 640,000

Cost of motors for dishwashers 1,000,000

Sales Commission $8 per dishwasher

Required:

A. Prepare a Contribution Income Statement for the month of May

B. Determine if the following scenarios would be good business decisions. All scenarios are referenced to the above original data. Show calculations in a comparative contribution income statement.

1. The Vice President of Manufacturing believes that by using higher quality metal manufacturing materials, which will add $4 per unit more to the manufacturing cost, the company could sell 15% more dishwashers.

2. The Vice President of Marketing believes that if radio advertising were increased by $500,000, the company could sell 20% more units.

3. The Vice President of Sales believes that if the selling price is lowered by $5, the company would sell 15% more units.

4. The Vice President of Marketing believes that if the commission to the sales force is increased by $2 to $10 per dishwasher, the selling price is increased by $4, and the advertising is increased by $500,000, the company can increase its sales volume by 25%.