Exercise 19-05

Carey Company had sales in 2019 of $1,792,000 on 64,000 units. Variable costs totaled $1,152,000, and fixed costs totaled $479,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.60). 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.

CAREY COMPANY CVP Income Statement Choose the accounting period December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
		Total		Per Unit
Select an item Total Fixed ExpensesVariable CostsTotal Variable ExpensesFixed CostsAdministrative ExpensesNet Income/(Loss)Cost of Goods SoldGross ProfitContribution MarginSalesSelling Expenses		$Enter a dollar amount		$Enter a dollar amount
Select an item Variable CostsTotal Variable ExpensesAdministrative ExpensesGross ProfitContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed Expenses		Enter a dollar amount		Enter a dollar amount
Select a summarizing line for the first part Net Income/(Loss)Contribution MarginGross ProfitFixed CostsVariable CostsAdministrative ExpensesSelling ExpensesCost of Goods SoldSalesTotal Variable ExpensesTotal Fixed Expenses		Enter a total of the two previous amounts		$Enter a total of the two previous amounts
Select an item Fixed CostsVariable CostsNet Income/(Loss)Gross ProfitAdministrative ExpensesCost of Goods SoldContribution MarginSelling ExpensesSalesTotal Fixed ExpensesTotal Variable Expenses		Enter a dollar amount
Select a closing name for this statement SalesSelling ExpensesCost of Goods SoldTotal Fixed ExpensesVariable CostsGross ProfitAdministrative ExpensesNet Income/(Loss)Contribution MarginTotal Variable ExpensesFixed Costs		$Enter a total amount for this statement

(b) Prepare a projected CVP income statement for 2020, 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.)

CAREY COMPANY CVP Income Statement Choose the accounting period For the Quarter Ended December 31, 2020December 31, 2020For the Year Ended December 31, 2020
		Total		Per Unit
Select an item Contribution MarginCost of Goods SoldTotal Fixed ExpensesFixed CostsTotal Variable ExpensesAdministrative ExpensesSalesNet Income/(Loss)Selling ExpensesVariable CostsGross Profit		$Enter a dollar amount		$Enter a dollar amount rounded to two decimal places
Select an item Variable CostsAdministrative ExpensesGross ProfitNet Income/(Loss)Contribution MarginSalesFixed CostsCost of Goods SoldSelling ExpensesTotal Fixed ExpensesTotal Variable Expenses		Enter a dollar amount		Enter a dollar amount rounded to two decimal places
Select a summarizing line for the first part Variable CostsAdministrative ExpensesContribution MarginNet Income/(Loss)Gross ProfitCost of Goods SoldTotal Variable ExpensesFixed CostsSelling ExpensesSalesTotal Fixed Expenses		Enter a total of the two previous amounts		$Enter a total of the two previous amounts
Select an item Variable CostsSelling ExpensesContribution MarginNet Income/(Loss)Gross ProfitTotal Fixed ExpensesTotal Variable ExpensesAdministrative ExpensesCost of Goods SoldFixed CostsSales		Enter a dollar amount
Select a closing name for this statement Cost of Goods SoldSalesNet Income/(Loss)Contribution MarginGross ProfitSelling ExpensesAdministrative ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsFixed Costs		$Enter a total amount for this statement

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