West Coast Toast, Inc. manufactures and sells toaster ovens. Last month, the company produced and sold $10,000$

units at a price of $$75$ each. Related information appears below:

Required:

a$.$ Identify all costs above as either a product cost $($specifically DM$,$ DL or $OH)$ or a period cost $($PC$).$

b$.$ The company uses the cost$-$plus approach to pricing and wants to achieve an approximate profit of $30$ percent.

Did it meet its profit objective last month? Briefly explain. Regardless, what two specific actions would you

recommend to improve its profitability?

c$.$ If the company had only sold $7,000$ units last month, what dollar amount would it report for cost of goods sold as

well as ending inventory in its financial statements? Round your final answer to the nearest dollar.

d$.$ Identify all costs as either a variable cost $($VC$)$ or a fixed cost $($FC$)$ then calculate the variable cost per unit

$($rounded to the nearest penny$)$ assuming $10,000$ units were produced and sold as well as the total fixed costs.

What is the break$-$even point $($rounded to the nearest whole unit$)?$

Prepare a CVP income statement to answer each scenario below. The scenarios are independent of each other and

unless specified otherwise, use the volume, rounded VC per unit and FC data from part d as well as a price of $$75$ per

unit.

e$.$ For next month, the company is considering using recycled materials for its product. If so$,$ its most recent costs for

materials would increase by $$10$ per unit. As a result, the company would increase the price by $$5$ per unit to

help offset that cost increase. In addition, management would increase advertising by $$15,000.$ If those changes

are made, the company anticipates that unit sales $($and production$)$ volume would increase by $2,000$ units. What

is the projected net income under this scenario?

f$.$ For next month, the company is considering whether it should make upgrades to the factory and equipment; if so$,$

the rent on factory and equipment would increase by $$10,000.$ Management projects that its sales $($and

production$)$ volume would increase by $4,000$ units, if the price were lowered by $$10$ per unit for all units. What is

the projected net income under this scenario?

g$.$ Would you recommend either course of action in part e or part f$?$ Briefly explain.

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