Question

1. Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.30 p per unit. Fixed costs are expected to amount to 52,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.40 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 9 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth $0.104 U.S. dollar.)

Suppose management alters its current plans by spending an additional amount of 4,300 p on advertising and increases the selling price to 6.30 p per unit. Calculate the profit on 62,000 units. (Do not round intermediate calculations. Enter your answer in pesos.)

Profit: ____________ p

The Sorde Company has just approached Corrientes to make a special one-time purchase of 12,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Corrientes would have to charge per unit on this special order to earn additional profit of 14,400 p? (Do not round intermediate calculations. Round your answer to 2 decimal places. Enter your answer in pesos.)

Sales price required: ________ p per unit

Answer 1

1. Profit for 62000 units = 150,346 p

Contribution Margin Income Statement
Sales Revenue	390,600
Variable Costs	183,954
Contribution Margin	206,646
Fixed Costs	56,300
Net Operating Income	150,346

2.
Sales price required = (14400+12000 x 2.40) / 12000 = 3.60 p per unit