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problem: Mattingly Corporation sells a single product for dollar ($) 150 per unit. Total sales were 6,000 units. The firm is considering a 10% price decrease in order to stay competitive. It is estimated that such a reduction will increase sales volume by 10%. Suppose a 40% tax rate. Costs are budgeted as follows:

Direct material

$30 per unit

Direct labor

$20 per unit

Variable manufacturing overhead

$15 per unit

Variable selling and administrative

$10 per unit

Fixed manufacturing overhead

$100,000

Fixed selling and administrative

$80,000

Required:
Make a budgeted income statement for next year suppose that the firm reduces prices as planned.

 

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