Refer to the original data. Assume that the company sold 31,000 units last year.

Question

Refer to the original data. Assume that the company sold 31,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $77,000 increase in advertising, would cause annual sales in units to increase by one-third.

Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. (Round your per unit values to 2 decimal places and other answers to the nearest dollar amount. Omit the "$" sign in your response.)

$   

$  

$   

$   

Refer to the original data. Assume that the company sold 31,000 units last year. The sales manager is convinced that a 15% reduction in the selling price, combined with a $77,000 increase in advertising, would cause annual sales in units to increase by one-third.

Explanation / Answer

                                                            Last year Projected Volume 31,000 Volume 41,333 Per Unit Per Unit Sales $16 $496000 $13.6 $562128.8 Variable expenses $8 $248000 $8 $330664.0 Contribution margin $8 $248000 $5.6 $231464.8 Fixed expenses $163000 $240000.0 Operating income $85000 -$8535.2

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