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Sheffield Company had sales in 2020 of $1,865,000 on 74,600 units. Variable costs totaled $1,119,000 and fixed costs totaled $473,000 A new raw material is
Sheffield Company had sales in 2020 of $1,865,000 on 74,600 units. Variable costs totaled $1,119,000 and fixed costs totaled $473,000 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 $114,000. 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. Before Sheffield Company had the chance to implement usage of the new raw material, new industry specifications were announced and result in the following changes for the Sheffield Company. Variable costs will increase by 15% per unit and fixed costs will increase by $55,000. 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. Attempts: 0 of 3 used Using multiple attempts will impact your score. 25% score reduction after attempt 2
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