Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $5.00 4.00 0.50 0.30 For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. repare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new erial and (b) using the new material and increasing the selling price.
Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $5.00 4.00 0.50 0.30 For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. repare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new erial and (b) using the new material and increasing the selling price.
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 5EA: Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost...
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Question
9
![Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the
product required $320,000 of fixed costs. Its per unit variable costs follow.
Direct materials
Direct labor
Variable overhead costs
Variable selling and administrative costs
For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and
reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling
and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per
unit, which would decrease unit sales volume to 38,250 units.
2. Prepare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new
material and (b) using the new material and increasing the selling price.
BURCHARD COMPANY
Contribution Margin Income Statement
Number of units:
With new material
$
45,000
$ 5.00
4.00
0.50
0.30
With new
material and
price increase
0 $
38,250
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1799000-33ab-4b28-9bb2-f03cfa8defbf%2F8c524f1a-3d74-4f7a-8930-75f3690dbe67%2F86nsqyi_processed.png&w=3840&q=75)
Transcribed Image Text:Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the
product required $320,000 of fixed costs. Its per unit variable costs follow.
Direct materials
Direct labor
Variable overhead costs
Variable selling and administrative costs
For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and
reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling
and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per
unit, which would decrease unit sales volume to 38,250 units.
2. Prepare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new
material and (b) using the new material and increasing the selling price.
BURCHARD COMPANY
Contribution Margin Income Statement
Number of units:
With new material
$
45,000
$ 5.00
4.00
0.50
0.30
With new
material and
price increase
0 $
38,250
0
0
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