Reference no: EM132264472

Question 1:

Shown below are units produced and total manufacturing costs for the past four months at ABC Manufacturing Corporation:

		Units Produced	Total
	Jul..............	120	$44,600
	Aug............	150	$51,000
	Sep.............	180	$66,800
	Oct.............	160	$57,000

Instructions:

1- Assume that the selling price is $500 per unit, using contribution margin approach, what was the amount of net operating income?

Question 2:

The Havana Company is introducing a new product and must decide its price. An estimated demand schedule for the product is as follows:

Units  demanded	Price per unit
20,000	$5
14,000	$7
9,000	$9

Estimated costs are as follows:

Variable manufacturing costs	$2.20 per unit
Fixed manufacturing costs	$20,000 per year
Variable selling and administrative costs	$1.00 per unit
Fixed selling and administrative costs	$5,000 per year

Instruction

1. Using the contribution margin format, prepare an income statement for each selling price.

2. Which price should Havana select? Explain.