Carey Company had sales in 2019 of $1,923,000 on 64,100 units. Variable costs totaled $897,400, and fixed costs totaled $502,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $2.80). However, to process the new raw material, fixed operating costs will increase by $98,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold. (a) Prepare a projected CVP income statement for 2020, assuming the changes have not been made.

Answer :

Answer:

a) CVP Income Statement                            Total                per unit

Sales                                                         $1,923,000             $30

Variable costs                                          -$897,400              -$14

Contribution                                             $1,025,600             $16

Fixed Costs                                             -$502,000

Net Income                                              $523,600

Explanation:

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