Question

ent CALCULATOR FULL SCREEN PRINTER VERSTON BACK NEX Exercise 19-05 Your answer is partially correct. Try again. Carey Company had sales in 2019 of $1,766,800 on 63,100 units. Variable costs totaled $1,009,600, and fixed costs totaled $499,000. 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 $98,000. 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. CAREY COMPANY CVP Income Statement For the Year Ended December 31, 2020 Total Per Unit T Sales 1 Variable Costs Contribution Margin . Fixed Costs Net Income/(Loss)

Answer 1

For answer (b)

New variable cost per unit = $16-3.20 =$12.80

New selling price per unit = $28-(3.20*1/2) = $26.40

New fixed cost = $499000+98000 = $597000

New sold units = 63100+5% of 63900 = 66255 units

Answer (a)	CAREY COMPANY
	CVP Statement
	For the year Ended December 31, 2020
		Total	Per Unit
	Sales	$        1,766,800	$     28.00
	Variable Cost	$        1,009,600	$     16.00
	Contribution	$            757,200	$     12.00
	Fixed Cost	$            499,000
	Net income (loss)	$            258,200
Answer (b)	CAREY COMPANY
	CVP Statement
	For the year Ended December 31, 2020
		Total	Per Unit
	Sales	$        1,749,132	$     26.40
	Variable Cost	$            848,064	$     12.80
	Contribution	$            901,068	$     13.60
	Fixed Cost	$            597,000
	Net income (loss)	$            304,068