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Question 4 Waterway Company had sales in 2019 of $1,806,000 on 64,500 units. Variable costs totaled $1,032,000, and fixed costs totaled $508,000. A new raw
Question 4 Waterway Company had sales in 2019 of $1,806,000 on 64,500 units. Variable costs totaled $1,032,000, and fixed costs totaled $508,000. 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 $107,000. 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. WATERWAY COMPANY CVP Income Statement For the Year Ended December 31, 2020 Total Per Unit Sales 1,806,000 Variable Costs Contribution Margin Fixed Costs Net Income/(Loss) (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 O decimal places, e.g. 1,225.) WATERWAY COMPANY CVP Income Statement For the Year Ended December 31, 2020 Total Per Unit Sales Variable Costs Contribution Margin Fixed Costs Net Income/(Loss) Click if you would like to Show Work for this question: Open Show Work
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