Question

Carey Company had sales in 2016 of $1,716,000 on 66,000 units. Variable costs totaled $1,188,000, and fixed costs totaled $473,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.60). However, to process the new raw material, fixed operating costs will increase by $100,000. 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 the sales price reduction will result in a 5% increase in the number of units sold. (a) Prepare a projected CVP income statement for 2017, assuming the changes have not been made.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Carey Company had sales in 2016 of $1,716,000 on 66,000 units. Variable costs totaled $1,188,000, and fixed costs totaled $473,000.

Contribution format income statement:

Sales= 1,716,000

Variable costs= 1,188,000

Contribution margin= 528,000

Fixed costs= 473,000

Net operating income= 55,000