Coronado Company had sales in 2020 of $1,690,000 on 67,600 units. Variable costs totaled $1,014,000 and fixed costs totaled $549,000. 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 $136,000. 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. Prepare a projected CVP income statement for 2020 assuming the changes have not been made. Coronado Company CVP Income Statement For the Year Ended December 31, 2020 Sales Variable Costs Contribution Margin tA 1690000 1014000 676000 Less v Fixed Costs 549000 i Net Income/(Loss) 127000 Prepare a projected CVP income statement for 2020 assuming that changes are made as described. Coronado Company CVP Income Statement For the Year Ended December 31, 2020 Sales Variable Costs Contribution Margin Less Fixed Costs Net Income/(Loss) $ 1616992 843648 773344 685000 i 88344 Before Coronado Company had the chance to implement usage of the new raw material, new industry specifications were announced and result in the following changes for the Coronado Company. Variable costs will increase by 15% per unit and fixed costs will increase by $48,000. Management feels that a $3 per unit price increase is needed to accommodate the cost increases. However, this will result in a 10% decrease in units sold. Prepare a CVP income statement assuming these changes have been made. Sales Coronado Company CVP Income Statement For the Year Ended December 31, 2020 Variable Costs Contribution Margin 1703520 1049490 654030 Less Fixed Costs 597000 i Net Income/(Loss) 57030 Still implementing the changes in part (b), the marketing department suggests implementing an advertising promotion that would increase variable costs by $0.50 per unit but would retain the original sales volume of 67,600 units. Prepare a CVP income statement with these changes. Coronado Company CVP Income Statement $ Do you recommend implementation of the advertising program? Why or why not?