Exercise 19-5

Carey Company had sales in 2016 of $1,768,500 on 65,500 units. Variable costs totaled $1,048,000, and fixed costs totaled $513,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.20). However, to process the new raw material, fixed operating costs will increase by $91,000. 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 2017, 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.)

CAREY COMPANY CVP Income Statement For the Year Ended December 31, 2017December 31, 2017For the Quarter Ended December 31, 2017
		Total		Per Unit
Total Fixed ExpensesAdministrative ExpensesSalesSelling ExpensesVariable CostsTotal Variable ExpensesContribution MarginGross ProfitCost of Goods SoldFixed CostsNet Income/(Loss)		$		$
Variable CostsNet Income/(Loss)Selling ExpensesTotal Variable ExpensesCost of Goods SoldAdministrative ExpensesSalesGross ProfitTotal Fixed ExpensesContribution MarginFixed Costs
Fixed CostsTotal Variable ExpensesNet Income/(Loss)Selling ExpensesAdministrative ExpensesCost of Goods SoldSalesContribution MarginTotal Fixed ExpensesVariable CostsGross Profit				$
Gross ProfitAdministrative ExpensesFixed CostsSelling ExpensesCost of Goods SoldContribution MarginVariable CostsTotal Fixed ExpensesNet Income/(Loss)SalesTotal Variable Expenses
Fixed CostsContribution MarginSalesGross ProfitTotal Fixed ExpensesCost of Goods SoldNet Income/(Loss)Selling ExpensesTotal Variable ExpensesVariable CostsAdministrative Expenses		$

(b) Prepare a projected CVP income statement for 2017, 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 December 31, 2017For the Quarter Ended December 31, 2017For the Year Ended December 31, 2017
		Total		Per Unit
Cost of Goods SoldAdministrative ExpensesContribution MarginTotal Fixed ExpensesSelling ExpensesFixed CostsVariable CostsGross ProfitTotal Variable ExpensesNet Income/(Loss)Sales		$		$
SalesContribution MarginCost of Goods SoldGross ProfitSelling ExpensesAdministrative ExpensesVariable CostsFixed CostsTotal Fixed ExpensesNet Income/(Loss)Total Variable Expenses
Cost of Goods SoldFixed CostsTotal Fixed ExpensesAdministrative ExpensesTotal Variable ExpensesVariable CostsSelling ExpensesNet Income/(Loss)Gross ProfitContribution MarginSales				$
Contribution MarginAdministrative ExpensesVariable CostsCost of Goods SoldTotal Variable ExpensesFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesTotal Fixed Expenses
Contribution MarginSalesNet Income/(Loss)Total Fixed ExpensesVariable CostsSelling ExpensesCost of Goods SoldGross ProfitTotal Variable ExpensesFixed CostsAdministrative Expenses		$