Question
Polzin Company had sales in 2012 of $1,500,000 on 60,000 units. Variable costs totaled $840,000, and fixed costs totaled $500,000. A new raw material is
Polzin Company had sales in 2012 of $1,500,000 on 60,000 units. Variable costs totaled $840,000, and fixed costs totaled $500,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $2.80). However, to process the new raw material, fixed operating costs will increase by $60,000. 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 7% increase in the number of units sold.
Instructions
Complete the CVP income statement for 2012, assuming the changes are made as described.
CVP Income Statement (Current)
Total Per Unit
Sales
Variable Expenses
Contribution Margin
Fixed Expenses
Net Income
CVP Income Statement (Current)
Total Per Unit
Sales
Variable Expenses
Contribution Margin
Fixed Expenses
Net Income
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