Managerial Accounting: E19-5 Hall Company had sales in 2014
Managerial Accounting E19-5 Hall Company had sales in 2014 of $1,941,000 on 64,700 units. Variable cost totaled $1,164,600, and fixed cost totaled $409,600. A new raw material is available that will decrease the variable costs per unit by 30% (or $5.40). However, to process the new raw material, fixed operating costs will increase by $156,600. Management feels that one-half of declines in the variable cost per unit should be passed on to customers in the form of sales price reduction. The marketing department expects that this sales price reduction will result in 5% increase in number units sold.
Instruction Prepare a projected CVP income statement of 2014 (a) assuming the changes have not been made, and (b) assuming that changes are made as described.