accounting-REQUIRED: Redo Alpine, Inc.’s 2012 Income Statement in the contribution format

QUESTION

REQUIRED: Redo Alpine, Inc.’s 2012 Income Statement in the contribution format. Show both a total column and a per unit column on your statement. Income Statement for the year 2012 Particulars Per Unit $ Total $ Sales in units 40,000 Selling price 12 480000 Less Variable Expenses Direct Material 3 120,000 Direct Labour 1.64 65,600 Variable Manufacturing Overheads 0.5 20000 Variable Selling Expenses Sales Commission 0.08 38,400 Shipping 0.35 14,000 Variable Adminstrative expenses 0.08 3,200 Total Variable expenses 5.65 261200 Contribution 6.35 218800 Less Fixed Expenses Fixed Manufacturing Overheads 70000 Fixed Selling expenses 110,000 Fixed Adminstrative expenses 85,000 Total Fixed Expenses 265000 Net Loss -46200 2) In an effort to make 2013 profitable, Micah Patdu, the president is considering two proposals prepared by members of her staff a.Jon Michael, 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. Particulars Per Unit $ Total $ Sales in units 70,000 Selling price 9 630000 Less Variable Expenses Direct Material 3.00 210,000 Direct Labour 1.64 114,800 Variable Manufacturing Overheads 0.5 35000 Variable Selling Expenses Sales Commission 0.08 50,400 Shipping 0.35 24,500 Variable Adminstrative expenses 0.08 5,600 Total Variable expenses 5.65 440300 Contribution 3.35 189700 Less Fixed Expenses Fixed Manufacturing Overheads 70000 Fixed Selling expenses 110,000 Fixed Adminstrative expenses 85,000 Total Fixed Expenses 265000 Net Loss -75300 Mary Wilkinson, 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, she is confident this would trigger a 50 percent increase in unit sales. Particulars Per Unit $ Total $ Sales in units 60,000 Selling price 15 900000 Less Variable Expenses Direct Material 3.00 180,000 Direct Labour 1.64 98,400 Variable Manufacturing Overheads 0.5 30000 Variable Selling Expenses Sales Commission 0.12 108,000 Shipping 0.35 21,000 Variable Adminstrative expenses 0.08 4,800 Total Variable expenses 5.69 442200 Contribution 9.31 457800 Less Fixed Expenses Fixed Manufacturing Overheads 70000 Fixed Selling expenses 200,000 Fixed Adminstrative expenses 85,000 Total Fixed Expenses 355000 Net Income 102800 3. Refer to the original data. Micah Patdu, 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? Breakeven Point in Units = Fixed expenses + Target profit Contribution per Unit Selling price 12 Less Variable Expenses 3.92 Contribution Margin per Unit 8.08 Breakeven Point in Units = 324000 8.08 40099 or rounding off to 40100

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