Question: 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.