Question

how do you do part b

Exercise 19-05 (Video) Vaughn Company had sales in 2019 of $1,831,200 on 65,400 units, Variable costs totaled $1,046,400, and fixed costs totaled $450,000 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, foed operating costs will increase by $96,000. 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. VAUGHN COMPANY CVP Income Statement For the Year Ended December 31, 2020 Per Unit 1831200 Variable costs 1046400 Contribution Margin 794800 Fixed Costs 450000 Net Income (Loss) 334800 (b) Prepare a projected CV income statement for 2020, assuming that changes are made as described. (Round per unit cost to 2 decimal places, e., 5.25 and all other answer decimal places, e.g. 1,225.) VAUGHN COMPANY CVP Income Statement For the Year Ended December 31, 2020 Total Per Unit

Answer 1

b) VAUGHN COMPANY

CVP Income statement

For the year ended December 31,2020

	Total	Per unit
Sales (65400*1.05)	1812888	26.40
Variable cost	878976	12.80
Contribution margin	933912	13.60
Fixed cost (450000+96000)	546000
Net income (loss)	387912