Required information [The following information applies to the questions displayed below.] Burchard Company sold 43,000 units of its only product for $17.60 per unit this year. Manufacturing and selling the product required $316,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $ 4.80 3.80 0.48 0.28 For the next year, management will use a new material, which will reduce direct materials costs to $2.40 per unit and reduce direct labor costs to $1.90 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 $21.12 per unit, which would decrease unit sales volume to 40,850 units.
Required information [The following information applies to the questions displayed below.] Burchard Company sold 43,000 units of its only product for $17.60 per unit this year. Manufacturing and selling the product required $316,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs $ 4.80 3.80 0.48 0.28 For the next year, management will use a new material, which will reduce direct materials costs to $2.40 per unit and reduce direct labor costs to $1.90 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 $21.12 per unit, which would decrease unit sales volume to 40,850 units.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
Burchard Company sold 43,000 units of its only product for $17.60 per unit this year. Manufacturing and selling the product
required $316,000 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 $2.40 per unit and
reduce direct labor costs to $1.90 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 $21.12 per unit,
which would decrease unit sales volume to 40,850 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
43,000
$ 4.80
3.80
0.48
0.28
With new
material and
price increase
40,850](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F52615ebc-3deb-446b-94e8-8fddbf33eb42%2F316ee3ab-ace0-43d3-a874-de47dbc9738a%2Fxfzgi1_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Burchard Company sold 43,000 units of its only product for $17.60 per unit this year. Manufacturing and selling the product
required $316,000 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 $2.40 per unit and
reduce direct labor costs to $1.90 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 $21.12 per unit,
which would decrease unit sales volume to 40,850 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
43,000
$ 4.80
3.80
0.48
0.28
With new
material and
price increase
40,850
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