How would I find the new income statement when variable costs increase $0.50?
Booth Company had sales in 2020 of $1,770,000 on 70,800 units. Variable costs totaled $1,062,000 and xed costs totaled $485,000. 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, xed 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. V Your answer is correct. Before Booth Company had the chance to implement usage of the new raw material, new industry specications were announced and result in the following changes for the Booth Company. Variable costs will increase by 15% per unit and xed costs will increase by $46,000. 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. Booth Company CVP Income Statement $ 1784160 1099170 B Contribution Margin 3 684990 531000 a Net Income/(Loss) : $ 153990 {> Sales {b Variable Costs 4} _; Less l 1 l Fixed Costs I Your answer is partially correct. 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 70,800 units. Prepare a CPV income statement with these changes. Use the information in part (b) to complete this section. Booth Company CVP Income Statement For the Year Ended December 31, 2020 3 Sales $ 1784160 Variable Costs 549585 Contribution Margin 2333745 l Less 9,1 l Fixed Costs 3 531000 a Net Income/(Loss) $ 1802745 Do you recommend implementation of the advertising program? Why or why not? The implementation of the advertising program is as the net income would 4}