Expert Answer :The Monteiro Manufacturing Corporation manufacture

Solved by verified expert :Budgeted profit, what-if analysisThe Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation’s condensed income statement for the year ended December 31, 2011, follows:Sales (200,000 units)1,000,000Cost of goods sold600,000Gross margin400,000Selling expenses150,000Administrative expenses100,000250,000150,000Monteiro’s budget committee has estimated the following changes for 2012:30% increase in number of units sold20% increase in material cost per unit15% increase in direct labor cost per unit10% increase in variable indirect cost per unit5% increase in indirect fixed costs8% increase in selling expenses, arising solely from increased volume 6% increase in administrative expenses, reflecting anticipated higher wage and supply price levelsAny changes in administrative expenses caused solely by increased sales volume are considered immaterial.Because inventory quantities remain fairly constant, the budget committee considered that for budget purposes any change in inventory valuation can be ignored. The composition of the cost of a unit of finished product during 2011 for materials, direct labor, and manufacturing support, respectively, was in the ratio of 3:2:1. In 2011, $40,000 of manufacturing support was for fixed costs. No changes in production methods or credit policies were contemplated for 2012.Required:(a) Compute the unit sales price at which the Monteiro Manufacturing Corporation must sell its umbrellas in 2012 in order to earn a budgeted profit of $200,000.(b) Unhappy about the prospect of an increase in selling price, Monteiro’s sales manager wants to know how many units must be sold at the old price to earn the $200,000 budgeted profit. Compute the number of units that must be sold at the old price to earn $200,000.(c) Believing that the estimated increase in sales is overly optimistic, one of the company’s directors wants to know what annual profit is likely if the selling price determined in part a is adopted but the increase in sales volume is only 10%. Compute the budgeted profit in the case.