Party People, Inc. imports and sells animal shaped piñatas. In planning for the
ID: 2538806 • Letter: P
Question
Party People, Inc. imports and sells animal shaped piñatas. In planning for the coming year, the company's owner is evaluating several scenarios. For each scenario under consideration, prepare a contribution margin income statement showing the anticipated operating income. Consider each scenario independently. Last year's income statement is as follows: 3. Total $600,000 350,000 250,000 5.00 175,000 75,000 Per Unit $12.00 7.00 Sales Revenue Variable Expense Contribution Margin Fixed expenses Operating Income Required a. The sales price increases by 10% and sales volume decreases by 5% b. The sales price increases by 10% and variable cost per unit increase by 5% C. The sales price decreases by 10% and sales volume increases by 20% d. Fixed expenses increase by $20,000 e. The sales price increases by 10%, variable expense per unit increases by 10%, fixed expenses increase by $25,00 and sales volume decreases by 10%Explanation / Answer
given information -
output = 600000/12 = 50000 units
(a) volume will be = 50000*0.95 = 47500 and sale price = 12*1.10 = 13.2
(b) sale price = 12*1.10 = 13.2 , variable cost = 7*1.05 = 7.35
(c) sale price decreased by 10% and sales volume increases by 20%
(d) Fixed expenses increases by 20000
(e) calcualtion as per given changes -
Please comment in case of further clarification required.
Total per unit Sales 600000 12 less variable expenses 350000 7 contribution Margin 250000 5 less Fixed expenses 175000 operating income 75000