Refer to the original data. Assume that the company sold 24,000 units last year. The sales manager is convinced that a 11% reduction in the selling price, combined with a $31,000 increase in advertising expenditures, would cause annual sales in units to increase by 25%. Prepare two contribution format income statements, one showing the results of last year's operations and one showing what the results of operations would be if these changes were made. (Round "Per Unit" answers to 2 decimal places.)
KLEIN COMPANY
Contribution Margin Income Statement
|
Last Year
|
Proposed
|
|
24,000
|
units
|
|
units
|
|
Total
|
Per Unit
|
Total
|
Per Unit
|
|
Sales
|
$600,000
|
$25.00
|
|
$22.80
|
|
Variable expenses
|
357,000
|
15.00
|
|
15.00
|
|
Contribution margin
|
243,000
|
10.00
|
0
|
7.80
|
|
Fixed expenses
|
162,000
|
|
|
|
|
Net operating income
|
$81,000
|
|
$0
|
|
How do you get the left side of this chart? Are the per unit costs from last year correct? How do you determine proposed units? I am hoping to get a breakdown of the answer so I can better understand the problem. Thanks.