Question

Booth Company had sales in 2020 of $1.810,000 on 72.400 units. Variable costs totuled $1.086.000 and trued costs totaled $493,000 Anew raw material is available that will decrease the variable costs per unit by 203 for $3.001. However, to process the new material, fed operating costs will increase by $130,000. 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. Prepare a projected CVP income statement for 2020 assuming the changes have not been made. Booth Company CVP Income Statement Prepare a projected CVP Income statement for 2020 assuming that changes are made as described Booth Company CVP Income Statement $ Before Booth Company had the chance to implement usage of the new material, new industry sections were announced and result in the following changes for the Booth Company. Variable costs will increase by 15 pertand costs will increase by $54.000. Management feels that a per unit price increase is needed to the cost increases. However, this will result in a 10x decrease in units sold. Prepare a CVP Income statement the changes have been made Booth Company CVP Income Statement 5 The ting department simplement the

Answer 1

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PARTA Projected CVP Income Statement assuming changes have not been made PARTA Projected CVP Income Statement assuming changes have made as descibed Booth Company CVP Income Statement For the Year Ended December 31, 2020 Booth Company CVP Income Statement For the Year Ended December 31, 2020 Sales Variable cost Contribution Margin Less : Fixed Cost Net Income (Loss) $ 1,810,000 $ 1,086,000 S 724,000 $ 493,000 $ 231,000 Sales Variable cost Contribution Margin Less : Fixed Cost Net Income (Loss) $ 1,731,808 $ 903,552 $ 828,256 $ 623,000 $ 205,256 PART B Projected CVP Income Statement assuming changes have been made Before Changes Number of units sold Selling price per unit Variable price per unit Fixed cost $ $ $ 72400 25 (1810000/72400) 15 (1086000/72400) 493,000 Booth Company CVP Income Statement For the Year Ended December 31, 2020 Sales Variable cost Contribution Margin Less : Fixed Cost Net Income (Loss) $ 1,824,480 $ 1,124,010 $ 700,470 $ 547,000 $ 153,470 After Changes Number of units sold Selling price per unit Variable price per unit Fixed cost $ $ $ 75296 (72400+ (72400*4%)) 23 ($25 - ($3*2/3)) 12 ($15 - ($15*20%)) 623,000 ($493,000+$130,000) PART B Projected CVP Income Statement assuming changes have been made Before Changes Number of units sold Selling price per unit Variable price per unit Fixed cost S $ $ 72400 25 (1810000/72400) 15 (1086000/72400) 493,000 Booth Company CVP Income Statement For the Year Ended December 31, 2020 After Changes Number of units sold Selling price per unit Variable price per unit Fixed cost Sales Variable cost Contribution Margin Less : Fixed Cost Net Income (Loss) 65160 (72400 - (72400*10%)) 28 ($25 +$3) 17.25 ($15 +($15*15%)) 547,000 ($493,000+$54,000) $ 2,027,200 $ 1,122,200 $ 905,000 $ 547,000 $ 358,000 $ $ $ Before Changes Number of units sold Selling price per unit Variable price per unit Fixed cost $ $ $ 72400 25 (1810000/72400) 15 (1086000/72400) 493,000 After Changes Number of units sold Selling price per unit Variable price per unit Fixed cost $ $ $ 72400 28 ($25 +$3) 15.50 ($15 + $0.5 547,000 ($493,000+$54,000)