Question
Booth Company had sales in 2020 of $1,715,000 on 68,600 units. Variable costs totaled $1,029,000 and fixed costs totaled $479,000. A new raw material is
Booth Company had sales in 2020 of $1,715,000 on 68,600 units. Variable costs totaled $1,029,000 and fixed costs totaled $479,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $116,000. Management feels that two-thirds 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 4% increase in the number of units sold.
Booth Company had sales in 2020 of $1,715,000 on 68,600 units. Variable costs totaled $1,029,000 and fixed costs totaled $479,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $116,000. Management feels that two-thirds 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 4% increase in the number of units sold. (a 1) Your answer is partially correct. Prepare a projected CVP income statement for 2020 assuming the changes have not been made. Booth Company CVP Income Statement For the Year Ended December 31, 2020 Sales $ 1728720 Variable Costs V 1065015 Contribution Margin 663705 Less Fixed Costs 534000 Net Income/(Loss) $ 129705Step by Step Solution
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