Question

Carey Company had sales in 2019 of $1,609,400 on 61,900 units. Variable costs totaled $866,600, and fixed costs totaled $475,000.

A new raw material is available that will decrease the variable costs per unit by 20% (or $2.80). However, to process the new raw material, fixed operating costs will increase by $90,000. 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 Choose the accounting periodDecember 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020 December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
		Total		Per Unit
Select an itemTotal Variable ExpensesNet Income/(Loss)Gross ProfitTotal Fixed ExpensesSelling ExpensesVariable CostsCost of Goods SoldSalesFixed CostsContribution MarginAdministrative Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		$Enter a dollar amount		$Enter a dollar amount
Select an itemAdministrative ExpensesSelling ExpensesSalesTotal Variable ExpensesVariable CostsCost of Goods SoldTotal Fixed ExpensesContribution MarginFixed CostsNet Income/(Loss)Gross Profit Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a dollar amount		Enter a dollar amount
Select a summarizing line for the first partCost of Goods SoldTotal Variable ExpensesVariable CostsTotal Fixed ExpensesContribution MarginSelling ExpensesNet Income/(Loss)Fixed CostsSalesGross ProfitAdministrative Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a total of the two previous amounts		$Enter a total of the two previous amounts
Select an itemFixed CostsTotal Fixed ExpensesGross ProfitSelling ExpensesTotal Variable ExpensesNet Income/(Loss)SalesAdministrative ExpensesContribution MarginCost of Goods SoldVariable Costs Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a dollar amount
Select a closing name for this statementContribution MarginCost of Goods SoldNet Income/(Loss)Total Variable ExpensesTotal Fixed ExpensesAdministrative ExpensesSelling ExpensesSalesFixed CostsGross ProfitVariable Costs Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		$Enter a total amount for this statement

(b) Prepare a projected CVP income statement for 2020, assuming that changes are made as described. (Round per unit cost to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 1,225.)

CAREY COMPANY CVP Income Statement Choose the accounting periodDecember 31, 2020For the Quarter Ended December 31, 2020For the Year Ended December 31, 2020 December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
		Total		Per Unit
Select an itemCost of Goods SoldFixed CostsNet Income/(Loss)Gross ProfitSalesContribution MarginAdministrative ExpensesVariable CostsTotal Fixed ExpensesTotal Variable ExpensesSelling Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		$Enter a dollar amount		$Enter a dollar amount rounded to two decimal places
Select an itemNet Income/(Loss)Cost of Goods SoldTotal Variable ExpensesTotal Fixed ExpensesGross ProfitContribution MarginSalesVariable CostsFixed CostsAdministrative ExpensesSelling Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a dollar amount		Enter a dollar amount rounded to two decimal places
Select a summarizing line for the first partTotal Fixed ExpensesContribution MarginSalesAdministrative ExpensesGross ProfitCost of Goods SoldNet Income/(Loss)Total Variable ExpensesVariable CostsFixed CostsSelling Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a total of the two previous amounts		$Enter a total of the two previous amounts
Select an itemSalesTotal Variable ExpensesFixed CostsAdministrative ExpensesTotal Fixed ExpensesContribution MarginVariable CostsNet Income/(Loss)Cost of Goods SoldGross ProfitSelling Expenses Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		Enter a dollar amount
Select a closing name for this statementVariable CostsSelling ExpensesContribution MarginTotal Variable ExpensesAdministrative ExpensesSalesGross ProfitCost of Goods SoldTotal Fixed ExpensesFixed CostsNet Income/(Loss) Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable CostsGross Profit		$Enter a total amount for this statement

Answer 1

a
CAREY COMPANY
CVP Income Statement
For the Year Ended December 31, 2020
	Total	Per unit
Sales	1609400	26
Variable costs	866600	14
Contribution Margin	742800	12
Fixed costs	475000
Net Income/(Loss)	267800
b
CAREY COMPANY
CVP Income Statement
For the Year Ended December 31, 2020
	Total	Per unit
Sales	1598877	24.60
Variable costs	727944	11.20
Contribution Margin	870933	13.40
Fixed costs	565000
Net Income/(Loss)	305933