The most recent "traditional format" I/S for Alpine Co. appears below. (Some expenses are broken out by fixed and variable portions to assist you in answering the various questions. Normally, the words fixed and variable do not appear on the traditional I/S.)

Alpine, Inc.
I/S
FYE December 31, 19x1
	35000	units
Sales			175,000
Less COGS
DM		35,000
DL		26,250
O/H		53,100	114,350
GP			60,650
Less Op. Exp
Selling:
Variable:
Sales Commissions		14,000
Shipping		3,500	17,500
Fixed (Salaries, etc.)			30,000
Administrative:
Variable:		1,750
Fixed		18,000	19,750
Total Expenses			67,250
Net Loss			(6,600)

All variable expenses vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable factory overhead is 50 cents per unit. Alpine's plant has a capacity of 60,000 units.

Management is very disappointed with 19x1's operating results. Several possible courses of action are being discussed to determine what should be done to make 19x2 more profitable.

Required:

1. Redo Alpine's 19x1 I/S in the contribution format. Show a total and a per unit column. Allow enough space to enter the solution to (2) below.
2. A. For 19x2, the sales manager would like to reduce the unit selling price by 10%. He is certain that this would fill the plant to capacity.

B. For 19x2, the executive vice president would like to increase the unit selling price by 10%, increase the sales commission to 12% of sales, and increase advertising by $25,000. She thinks this would trigger a 60% increase in volume.

Prepare two contribution income statements, one for each scenario (have a total and per unit column for each scenario.

Parts 3,4,5. Full income statement is NOT required.

3. Refer to the original data. The president thinks it would be unwise to change the unit selling price. Instead, he wants to use less costly materials in making the product, thereby reducing units costs by 25 cents. How many units would have to be sold in 19x2 to earn a target profit of $12,000.
4. Refer to the original data. Alpine's advertising agency thinks that the problem lies in inadequate promotion. How much may advertising be increased and still allow the company to earn a target return of 5% of sales on 50,000 units?

5. Refer to the original data. The company has been approached by an overseas distributor who wants to purchase 15,000 units on a special price basis. There would be no sales commission on these units; however, shipping costs would be doubled. In addition, a foreign import duty of $4,500 would have to be paid by Alpine on behalf of the overseas distributor. What unit price would have to be quoted on the 15,000 units to allow the company to earn a profit of $10,500 on TOTAL operations? Regular business would not be disturbed by the special order.