Please help with a2

Booth Company had sales in 2020 of $1,730,000 on 69,200 units. Variable costs totaled $1,038,000 and fixed costs totaled $491,000. 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 $130,000. 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.

(a1)

Correct answer iconYour answer is correct.

Prepare a projected CVP income statement for 2020 assuming the changes have not been made.

Booth Company CVP Income Statement

For the year ended December 31, 2020

Sales $ 1,730,000

Variable Cost 1,038,000

Contribution Margin $ 692,000

Less Fixed Cost $491,000.

Net Income/ (Loss) 201000

a2

Prepare a projected CVP income statement for 2020 assuming that changes are made as described.

Booth Company CVP Income Statement

For the year ended December 31, 2020

Sales

Variable Cost

Contribution

Less Fixed Cost

Net Income/ (Loss)