Sheridan Company had sales in 2020 of $1,845,000 on 73,800 units. Variable costs totaled $1,107,000 and...

 

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Sheridan Company had sales in 2020 of $1,845,000 on 73,800 units. Variable costs totaled $1,107,000 and fixed costs totaled $466,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed 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 that changes are made as described. Sales Variable Costs Sheridan Company CVP Income Statement For the Year Ended December 31, 2020 Contribution Margin Less : Fixed Costs Net Income/(Loss) Sheridan Company had sales in 2020 of $1,845,000 on 73,800 units. Variable costs totaled $1,107,000 and fixed costs totaled $466,000. A new raw material is available that will decrease the variable costs per unit by 20% (or $3.00). However, to process the new raw material, fixed 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 that changes are made as described. Sales Variable Costs Sheridan Company CVP Income Statement For the Year Ended December 31, 2020 Contribution Margin Less : Fixed Costs Net Income/(Loss)

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Sales 1845000 x 104 1919800 73800 x 104 76752 units Variable Costs per unit 1107000 73800 1500 New Variable Costs per unit 1500 300 x 067 1201 New Sal... View the full answer