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(Solved by Expert Tutors) Data: Alpine, Inc., has been experiencing losses for some time, as show


statement:

ALPINE, INC.

Income Statement

For the year ended June 30, 2016

Sales (40,000 Units at $12)????????????????????????????????????????? $480,000

Less: Cost of Goods Sold

?? Direct Materials???????????????????????????? ????????$120,000

?? Direct Labor???????????????????????????????????????????? 65,600

?? Manufacturing Overhead??????????????????????????? 90,000?????? 275,600

Gross Margin??????????????????????????????????????????????????????????????? 204,400

Less: Operating expenses:

?? Selling expenses:

????? Variable:

???????? Sales Commissions???????????? $38,400

???????? Shipping???????????????????????????? 14,000?????? 52,400

????? Fixed (Advertising, salaries)??????????????????? 110,000

??? Administrative expenses:

?????? Variable (billing, other)???????????????????????????? 3,200

?????? Fixed (salaries, other)???????????????????????????? 85,000?????? 250,600

Net Loss????????????????????????????????????????????????????????????????????? $(46,200)

All variable expenses in the company vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable manufacturing overhead is 50 cents per unit. The company?s plant has a capacity of 70,000 units.

Management is particularly disappointed with 2016?s operating results. Several possible courses of action are being studied to determine what should be done to make 2017 profitable.

REQUIRED:

  1. Redo Alpine, Inc.?s 2016 Income Statement in the contribution format. Show both a total column and a per unit column on your statement. ?

  1. In an effort to make 2017 profitable, Micah Patdu, the president is considering two proposals prepared by members of her staff:

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.

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.

Prepare two contribution income statements, one showing what profits would be under Jon Michael?s proposal and one showing what profits would be under Mary Wilkinson?s proposal. On each statement, include both total and per unit columns (do not show per unit data for fixed costs)?

  1. 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 2017 to earn a target profit of $59,000 for the year? ? ?

  1. Refer to the original data. Alpine, Inc.?s advertising agency thinks that the problem lies in inadequate promotion. By how much can advertising be increased and still allow the company to earn a target return of 4.5 percent on sales of 60,000 units? ??

 


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Apr 19, 2020

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