Exercise-3 (Change in sales volume, sales price, variable and fixed costs)

Aladin Company manufactures small batteries to be used in clocks, toys and some other electronic devices. The last month’s income statement of Aladin is given below:

Required:

Prepare Aladin’s new income statement under each of the following conditions:

1. The sales volume increases by 15%.
2. The selling price decreases by 20% per unit, and the sales volume increases by 30%.
3. The selling price increases by 50% per unit, fixed expenses increase by $20,000 and the sales volume decreases by 5%.
4. Variable expenses increase by 20% per unit, the selling price increases by 12%, and the sales volume decreases by 10%.

Solution:

(1). Sales volume (number of units sold) increases by 15%:

(2). Selling price decreases by 10% and the sales volume increases by 30%:

(3). Selling price increases by 50%, fixed expenses increase by $20,000 and the sales volume decreases by 5%:

(4). Variable expenses increase by 20% per unit, the selling price increases by 12%, and the sales volume decreases by 10%.