Hall Company had sales in the year 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000. The new raw material is available which will reduce the variable costs per unit by 25% (or $3.00). Though, to process the latest raw material, fixed operating costs will raise by $150,000. Management feels that one-half of the declines in the variable costs per unit must be passed on to customers in the form of a sales price reduction. The marketing department predicts that this sales price reduction will outcome in a 5% increase in the number of units sold.
Instructions:
Develop a projected CVP income statement for 2014:
a) Supposing the changes have not been made, and
b) Supposing that changes are made as given.