The president is considering two proposals prepared by members of his staff:For next year, the vice president would like to reduce the unit selling price by 20%. She is certain that this would fill the plant capacity. What profits would be under the vice president's proposal? WHITNEY COMPANYIncome StatementFor the Year Ended December 31Sales (45,000 units at $10 per unit) .Less cost of goods sold:$450,000Direct materials$90,000Direct labor .78,30098,500Manufacturing overhead266,800Gross margin ....Less operating expenses:Selling expenses:183,200Variable:Sales commissions$27,000Shipping5,40032,400Fixed (advertising, salaries)120,000Administrative:Variable (billing and other)Fixed (salaries and other)1,80048,000202,200Net operating loss$ (19,000)

The build-up of costs and the break-up costs showed in a statement called a cost sheet, it is a…

Answered: Sales (45,000 units at $10 per unit)..…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...

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The president is considering two proposals prepared by members of his staff:

For next year, the vice president would like to reduce the unit selling price by 20%. She is certain that this would fill the plant capacity. What profits would be under the vice president's proposal?

WHITNEY COMPANY
Income Statement
For the Year Ended December 31
Sales (45,000 units at $10 per unit) .
Less cost of goods sold:
$450,000
Direct materials
$90,000
Direct labor .
78,300
98,500
Manufacturing overhead
266,800
Gross margin ....
Less operating expenses:
Selling expenses:
183,200
Variable:
Sales commissions
$27,000
Shipping
5,400
32,400
Fixed (advertising, salaries)
120,000
Administrative:
Variable (billing and other)
Fixed (salaries and other)
1,800
48,000
202,200
Net operating loss
$ (19,000)

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