This year , Kirby company sold 35,000 units of production at $16 per unit. Maunfactoring and selling the product required $120,000 of mixed manufacturing costs and $180,000 of fixed selling and administrative expenses. This years variable costs and expenses per unit were:

Question

This year , Kirby company sold 35,000 units of production at $16 per unit. Maunfactoring and selling the product required $120,000 of mixed manufacturing costs and $180,000 of fixed selling and administrative expenses. This years variable costs and expenses per unit were: 
Material……………………………….....................................$4. 00 
Direct Labour(paid on the basis of completed units)………….$3.00 
Variable Manufacturing overhead costs……………………….$0.40 
Variable selling and administrative expenses…………………$0.20

Next year the company will use new raw material that is easier to work with and cheaper than the old material. A switch the new material will decrease material costs by 60% and direct labour costs can be decreased by 40%. The new material will not affect the products quality or marketability. The next set of decisions concerns the marketing strategy to be used. Because the factory’s output is creeping up to it’s annual capacity of 40,000 units, some consideration is being given to increase the selling price and to reduce the number of units sold. At this point two strategies have been identified. Under plan 1, the company will keep the price at the current level and sell the same volume as this year. This plan increases profit because of the materials change. Under plan 2, the products price will increase by 25%, but unit sales volume will fall only 10%. Under both plan 1 and 2, all of the fixed costs and variable costs(per unit) will be exactly the same.

1. Prepare side -by -side condensed forecasted income statements showing the anticipated results of plan 1 and 2 The statement should show sales. Total fixed costs, total variable costs and expenses, income before taxes, income taxes(30% rate), and net income.

Anonymous · Answer

They don't usually answer accounting questions in here.

Damara · Answer

This year , Kirby company sold 35,000 units of production at $16 per unit. Maunfactoring and selling the product required $120,000 of mixed manufacturing costs and $180,000 of fixed selling and administrative expenses. This years variable costs and expenses per unit were:
Material……………………………….....................................$4. 00
Direct Labour(paid on the basis of completed units)………….$3.00
Variable Manufacturing overhead costs……………………….$0.40
Variable selling and administrative expenses…………………$0.20

Next year the company will use new raw material that is easier to work with and cheaper than the old material. A switch the new material will decrease material costs by 60% and direct labour costs can be decreased by 40%. The new material will not affect the products quality or marketability. The next set of decisions concerns the marketing strategy to be used. Because the factory’s output is creeping up to it’s annual capacity of 40,000 units, some consideration is being given to increase the selling price and to reduce the number of units sold. At this point two strategies have been identified. Under plan 1, the company will keep the price at the current level and sell the same volume as this year. This plan increases profit because of the materials change. Under plan 2, the products price will increase by 25%, but unit sales volume will fall only 10%. Under both plan 1 and 2, all of the fixed costs and variable costs(per unit) will be exactly the same.

Required
1 Prepare side -by -side condensed forecasted income statements showing the anticipated results of plan 1 and 2 The statement should show sales. Total fixed costs, total variable costs and expenses, income before taxes, income taxes(30% rate), and net income.