Hall Company had sales in 2010 of \(\$ 1,500,000\) on 60,000 units. Variable costs totaled \(\$ 720,000\), and fixed costs totaled \(\$ 400,000\).

A new raw material is available that will decrease the variable costs per unit by \(25 \%\) (or \(\$ 3.00\) ). However, to process the new raw material, fixed operating costs will increase by \(\$ 150,000\). 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.

Instructions:

Prepare a CVP income statement for 2010,

(a) assuming the changes have not been made, and

(b) assuming that changes are made as described.