Question
Crane Company had sales in 2021 of $1,560,000 on 60,000 units. Variable costs totaled $936,000, and fixed costs totaled $520,000. A new raw material is
Crane Company had sales in 2021 of $1,560,000 on 60,000 units. Variable costs totaled $936,000, and fixed costs totaled $520,000. A new raw material is available that will decrease the unit variable costs by 20% (or $3.12). However, to process the new raw material, fixed operating costs will increase by $104,000. Management feels that one half of the decline in the unit variable costs 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 2022, assuming the changes have not been made. (Round per unit cost to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 1,225.)
(b) Prepare a projected CVP income statement for 2022, assuming that changes are made as described. (Round per unit cost to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 1,225.)
Crane Company had sales in 2021 of $1,560,000 on 60,000 units. Variable costs totaled $936,000, and fixed costs totaled $520,000. A new raw material is available that will decrease the unit variable costs by 20% (or $3.12). However, to process the new raw material, fixed operating costs will increase by $104,000. Management feels that one half of the decline in the unit variable costs 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 2022, assuming the changes have not been made. (Round per unit cost to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 1,225.) CRANE COMPANY CVP Income Statement Total Per Unit $ $ $ (b) Prepare a projected CVP income statement for 2022, assuming that changes are made as described. (Round per unit cost to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 1,225.) CRANE COMPANY CVP Income Statement Total Per Unit $ $ $ $Step by Step Solution
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