Question
Volmar Company had sales in 2020 of $1,551,000 on 51,700 units. Variable costs totalled $620,400, and fixed costs totalled $767,600. A new raw material is
Volmar Company had sales in 2020 of $1,551,000 on 51,700 units. Variable costs totalled $620,400, and fixed costs totalled $767,600.
A new raw material is available that will decrease the variable costs per unit by 20% (or $2.40). However, to process the new raw material, fixed operating costs will increase by $46,400. Management feel 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 10% increase in the number of units sold.
Prepare CVP income statement for 2020: (Round per unit cost to 2 decimal places, e.g. 15.25.)
(a) Assuming the changes have not been made:
VOLMAR COMPANY
CVP Income Statement (Unchanged)
TotalPer Unit
$
$
$
$
(b) Assuming that changes are made as described.
VOLMAR COMPANY
CVP Income Statement (with changes)
TotalPer Unit
$
$
$
$
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